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Calendar No. 518. 


63d Congress, ) 

SENATE. 

j Report 

2d Session . J 


( No. 597. 


FEDERAL TRADE COMMISSION. 


June 13, 1914. —Ordered to be printed. 


Mr. Newlands, from the ^Committee on Interstate Commerce, sub¬ 
mitted the following 

REPORT. 

*1 

[To accompany H. R. 15613.] 


The Senate Committee on Interstate Commerce, to which was re¬ 
ferred H. R. 15613, a bill to create an interstate trade commission, 
etc., passed by the House of Representatives on the 5th day of June, 
1914, reports as a substitute therefor Senate bill No. 4160, reported 
favorably to the Senate on the 5th day of June (calendar day, June 
6), 1914, to which latter bill have been added provisions regarding 
unfair competition and the investigation of foreign trade practices. 

The substituted bill is as follows: 


[Senate substitute for H. R. 15613.] 


Be it enacted, etc., That a commission is hereby created and established, to be 
known as the Federal Trade Commission, composed of five members, not more 
than three of whom shall be members of the same political parry, and the said 
Federal Trade Commission is referred to hereinafter as “ the commission/’ 

The words defined in this section shall have the following meaning when found 
in this act, to wit : 

“ Commerce ” means such commerce as Congress has the power to regulate 
under ttye Constitution. 

The term “corporation” or “corporations” shall include joint-stock associa¬ 
tions and all other associations having shares of capital or capital stock, 
organized to carry on business for profit. 

“Antitrust acts” means the act entitled “An act to protect trade and com¬ 
merce against unlawful restraints and monopolies,” approved July second, 
eighteen hundred and ninety; also sections seventy-three to seventy-seven, in¬ 
clusive. of an act entitled “An act to reduce taxation, to provide revenue for 
the Government, and for other purposes,” approved August twenty-seventh, 
eighteen hundred and ninety-four; and also the act entitled “An act to amend 
sections seventy-three and seventy-six of the act of August twenty-seventh, 
eighteen hundred and ninety-four, entitled ‘An act to reduce taxation, to pro¬ 
vide revenue for the Government, and for other purposes,’ ” approved February 
twelfth, nineteen hundred and thirteen. 










2 


FEDERAL TRADE COMMISSION. 


hinzni 3 
i °i 14-U 


ORGANIZATION. 

aSec. 2. Upon the organization of the commission, the Bureau of Corporations, 
and the offices of Commissioner and Deputy Commissioner of Corporations shall 
'cease to exist, and the employees of said bureau shall become employees of the 
commission in such capacity as it may designate. The commission shall take over¬ 
all the records, furniture, and equipment of said bureau. All work and proceed¬ 
ings pending before the bureau, may be continued by the commission free from 
tlie direction or control of the Secretary of Commerce. All appropriations hereto¬ 
fore made for the support and maintenance of the bureau and its work are 
liereby authorized to be expended by the commission for said purposes. 

Any commissioner myy be removed by the President for inefficiency, neglect 
of duty, or malfeasance in office. A vacancy in the commission shall not im¬ 
pair the right of the remaining commissioners to exercise all the powers of the 
commission. 

The commissioners shall be appointed by the President, by and with the 
ildvice and consent of the Senate. The terms of office of the commissioners 
shall oe Seven years each. The terms of those first appointed by the President 
shall date from the taking effect of this act, and shall be as follows: 

One shall be appointed for a term of three years, one for a term of four 
years, one for a term of five years, one for a term of six years, and 0129 for a 
term of seven years; and after said commissioners shall have been so first 
appointed all appointments, except to fill vacancies, shall be for terms of seven 
years each. The commission shall elect one of its members chairman for such 
period as it may determine. The commission shall elect a secretary and may 
elect an assistant secretary. Said secretary and assistant secretary shall hold 
their offices or connection with the commission at the pleasure of the com¬ 
mission. Each commissioner shall receive a salary of $10,000 per annum 
The secretary of the commission shall receive a salary of $5,000 per annum. 
The assistant secretary shall receive a salary of $4,000 per annum. In case 
of a vacancy in the office of any commissioner during his term, an appointment 
-shall be made by the President, by and with the advice and consent of the 
Senate, to fill such vacancy, for the unexpired term. The office of the com¬ 
mission shall be in the city of Washington, but the commission may at its 
pleasure meet and exercise all its powers at any other place, and may authorize 
one or more of its members to prosecute any investigation, and for the purposes 
thereof to exercise the powers herein given the commission. 

The commission shall have such attorneys, accountants, experts, examiners, 
special a gents, and other employees as may, from time to time, be appropriated 
for by Congress, and shall have authority to audit their bills and fix their 
compensation. With the exception of the secretary and assistant secretary 
and one clerk to each of the commissioners, and such attorneys and experts! 
as may be employed, all employees of the commission shall be a part of tlffi 
classified civil service. The commission shall also have the power to adopt a 
seal, which shall be judicially noticed, and to rent suitable rooms for the con¬ 
duct of its work. 

All the expenses of the commission, including all necessary expenses for 
transportation incurred by the commissioners or by their employees under 
their orders in making any investigation or upon official business in any other 
place than in the city of Washington, shall be allowed and paid on the presen¬ 
tation of itemized vouchers therefor, approved by the commission. 

The Auditor for the State and other departments shall receive and examine 
tall accounts of expenditures of the commission. 

Witnesses summoned before the commission shall be paid the same fees and 
tnileage that are paid witnesses in the courts of the United States. 

POWERS OF COMMISSION. 

Sec. 3. The commission shall have power among others— 

<a) To investigate from time to time, and as often as the commission may 
t<leem advisable, the organization, business, financial condition, conduct, prac¬ 
tices, and management, of any corporation engaged in commerce, and it's rela¬ 
tion to other corporations and to individuals, associations, and partnerships 

<b) To require any corporation subject to the provisions of this act which 
the commission may designate to furnish to the commission from time to time 
Information, statements, and records concerning its organization, business, 
financial condition, conduct, practices, management, and relation to other corpo- 

, OF. D. 

JIL iO J3J4 


FEDERAL TRADE COMMISSION. 


3 



m which such corporation under inquiry is engaged or concerning its relations 
to any individual, association, or partnership, and to make copies of the same. 

(c) To prescribe as near as may be a uniform system of annual reports from 
such corporations or classes of corporations subject to the provisions of this 
act, as the commission may designate, and to fix the time for the tiling of such 
reports, and to require such reports, or any special report, to be made under 
oath, or otherwise in the discretion of the commission. 

(d) To make public, in the discretion of the commission, any information 
obtained by it in the exercise of the powers, authority, and duties conferred 
upon it by this act, except so far as may be necessary to protect trade processes, 
names of customers, and such other matters as the commission may deem 
not to be of public importance, and to make annual and special reports to the 
Congress and to submit therewith recommendations for additional legislation. 

(e) In any suit in equity brought by or under the direction of the Attorney 
General as provided in the antitrust acts if the court finds for the complainant 
it may, upon its own motion or the motion of any party to such suit, refer the 
matter of the form of the decree to be entered to the commission as a master 
in chancery; whereupon the commission shall proceed in that capacity upon 
such notice to the parties and upon such hearing as the court may prescribe, 
and shall as speedily as practicable make report with its findings to the court, 
which report and findings having been made and filed shall be subject to the 
judicial procedure established for the consideration and disposition of a master’s 
report and findings in equity cases. 

(f) Wherever a restraining order or an interlocutory or final decree has here¬ 
tofore been entered or shall hereafter be entered against any defendant or 
defendants in any suit brought by the United States to prevent and restrain any 
violation of the antitrust acts, the commission shall have power, and it shall 
be its duty, upon the application of the Attorney General, to make investigation 
of the manner in which the order or decree has been or is being carried out, 
and as to whether the same has been or is being violated, and what, if any, 
further order, decree, or relief is advisable. It shall transmit to the Attorney 
General a report embodying its findings as a result of any such investigation 
with such recommendations for further action as it may deem advisable and 
the report shall be made public in the discretion of the commission. 

(g) If the commission believes from its inquiries and investigations, insti¬ 
tuted upon its own initiative or at the suggestion of the President, the Attorney 
General, or either House of Congress that any corporation, individual, asso¬ 
ciation, or partnership has violated any law of the United States regulating 
commerce, it shall report its findings and the evidence in relation thereto to the 
Attorney General with its recommendations. 

For the purpose of prosecuting any investigation or proeeding authorized by 
this section the commission, or its duly authorized agent or agents, shall at 
all reasonable times have access to, for the purpose of examination, and the 
right to copy any documents or writings of any corporation being investigated or 
proceeded against. 

(h) The commission is hereby directed to investigate, as expeditiously as 
may be, trade conditions in foreign countries where associations, combinations, 
or practices of buyers, dealers, or traders may injuriously affect the export 
trade of the United States, and also to investigate whether American exporters 
have combined with each other or with foreign producers or dealers to control 
prices abroad, and to report to Congress thereon from time to time. 

Sec. 4. The powers and jurisdiction herein conferred upon the commission 
shall extend over all trade associations, corporate combinations, and corpora¬ 
tions as hereinbefore defined engaged in or affecting commerce, except banks 
and common carriers. 

UNFAIR COMPETITION. 


Sec. 5. That unfair competition in commerce is hereby declared unlawful. 

The commission is hereby empowered and directed to prevent corporations 
from using unfair methods of competition in commerce. 

Whenever the commission shall have reason to believe that any corporation 
lias been or is using any unfair method of competition in commerce, it shall 
issue and serve upon such corporation a written order, at least thirty days 
in advance of the time set therein for hearing, directing it to appear before the 


4 


FEDERAL TRADE COMMISSION. 


commission and show cause why an order shall not be issued by the commission 
restraining and prohibiting it from using such method of competition, and if 
upon such hearing the commission shall find that the method of competition 
in question is prohibited by this act it shall thereupon issue an order restrain¬ 
ing and prohibiting the use of the same. The commission may at any time 
modify or set aside, in whole or in part, any order issued by it under this act. 

Whenever the commission, after the issuance of such order, shall find that 
such corporation has not complied therewith, the commission may petition 
the district court of the United States, within any district where the method 
in question was used or where such corporation is located or carries on busi¬ 
ness, praying the court to issue an injunction to enforce such order of the 
commission; and the court is hereby authorized to issue such injunction. 

Sec. 6. That if any corporation .subject to this act shall fail to file any 
annual or special report, as provided in subdivision (b) of section three 
hereof, within the time fixed by the commission for filing the same, and such 
failure shall continue for thirty days after notice of such default, the cor¬ 
poration shall forfeit to the United States the sum of $100 for each and every 
day of the continuance of such failure, which forfeiture shall be payable into 
the Treasury of the United States, and shall be recoverable in a civil suit in 
the name of the United States brought in the district where the corporation 
has its principal office or in any district in which it shall do business. It 
shall be the duty of the various district attorneys, under the direction of the 
Attorney General of the United States, to prosecute for the recovery of for¬ 
feitures. The costs and expenses of such prosecution shall be paid out of the 
appropriation for the expenses of the courts of the United States. 

PENALTIES. 

Sec. 7. Any person who shall willfully destroy, alter, mutilate, or remove 
out of the jurisdiction of the United States or authorize, assist in, or be privy 
to the willful destruction, alteration, mutilation, or removal out of the juris¬ 
diction of the United States of any book, letter, paper, or document containing 
an entry or memorandum relating to commerce, the production of which the 
commission may require under this act, or who shall willfully make any false 
entry relating to commerce in any book of accounts or record of any trade 
association, corporate combination, or corporation, subject to the provisions of 
this act, or who shall willfully make or furnish to said commission or to its 
agent any false statement, return, or record, knowing the same to be false in 
any material particular, shall be deemed guilty of a misdemeanor, and upon 
conviction thereof shall be punished by a fine of not exceeding $5,000 or by 
imprisonment not exceeding one year, or by both said punishments, in the 
discretion of the court. 

Any employee of the commission who divulges any fact or information which 
may come to his knowledge during the course of his employment by the com¬ 
mission, except in so far as it has been made public by the commission, or as he 
may be directed by the commission or by a court, shall be deemed guilty of a 
misdemeanor, and upon conviction thereof shall be punished by a fine not ex¬ 
ceeding $5,000, or by imprisonment not exceeding one year, or by both said pun¬ 
ishments, in the discretion of the court. 

testimony and immunity. 

Sec. 8 . The commission shall have and exercise the powers possessed by the 
Interstate Commerce Commission to subpoena and compel the attendance and 
testimony of witnesses and the production of evidence, and to administer oaths. 
All the powers, requirements, obligations, liabilities, and immunities imposed or 
conferred by the act to regulate commerce, as amended in relation to testimony 
before the Interstate Commerce Commission, shall apply to witnesses, testimony, 
and evidence before the commission. 

Sec. 9. The district courts of the United States, upon the application of the 
commission alleging a failure by any corporation, or by any of its officers or em¬ 
ployees, or by any witness, to comply with any order of the commission for the 
furnishing of information, shall have jurisdiction to issue such writs, orders, or 
other process as may be necessary to enforce any order of the commission and 
to punish the disobedience thereof. 

Sec. 10. The several departments and bureaus of the Government, when 
directed by the President, shall furnish the commission, upon its request, all 


FEDERAL TRADE COMMISSION. 


5 


records, papers, and information in their possession relating to any trade 
association, corporate combination, or corporation, subject to any of the pro¬ 
visions of this act. 

Amend the title so as to read: “ An act to create a Federal Trade Commis¬ 
sion, to define its powers and duties, and for other purposes.” 

THE TAFT ADMINISTRATION. 

The Senate Committee on Interstate Commerce has had under 
consideration for many years the organization of a trade commis¬ 
sion, with powers over trade analogous to those exercised by the 
Interstate Commerce Commission over transportation. 

Under President Taft’s administration, Senate resolution No. 98, 
iihxty-second Congress, first session, authorizing the Senate Com¬ 
mittee on Interstate Commerce to report to the Senate what changes 
were necessary or desirable in the laws relating to the control of 
corporations, persons, or firms engaged in interstate commerce, was 
presented by Mr. Clapp, the chairman of the committee, and was 
adopted by the Senate on the 26th day of July, 1911. Under this 
resolution exhaustive hearings were held, during which 103 persons 
gave their views on every phase of suggested trust legislation, filling 
nearly 3,000 pages of hearings. 

At the first hearing, on the 4th day of August, 1911, the Senate 
Committee on Interstate Commerce took up Senate bill 2941, intro¬ 
duced by Mr. Newlands, for the organization of a trade commission, 
and Mr. Newslands made a statement regarding it. The bill and 
statement appear in the appendix to this report, at pages 15 to 33. 

Later on, as a result of the additional light shed upon this subject 
by the hearings, Mr. Newlands introduced in the Senate, on February 
26, 1912, Senate bill 5485, Sixty-second Congress, second session, 
entitled “ A bill to create an interstate trade commission.” This bill 
was tentatively taken up by the committee and amended in many 
particulars, but the committee took no final action upon it. The bill 
as tentatively amended by the Senate Committee on Interstate Com¬ 
merce (appendix, p. 39) was reintroduced by Mr. Newlands on the 
12th day of April, 1913, as Senate bill 829. 

THE CUMMINS REPORT. 

The Senate committee, after long-continued hearings under Senate 
resolution 98, made a report, through Mr. Cummins, on the 26th day 
of Februarv, 1913 (S. Rept. 1326, 62d Cong., 3d sess.), m which 
were included the additional views of Messrs. Pomerene, Tillman, 
Gore, Newlands, Crane, Brandegee, Oliver, and Lippitt. 

The report of Mr. Cummins consisted mainly of a discussion of 
the decisions of the Supreme Court in the various trust cases, from 
the Knight case down to and including the Standard Oil and To¬ 
bacco cases; but it also took up the question of the desirability of 
legislation supplementary to the Sherman Act, and considered the 
question, among others, of a trade commission, declaring that 
through the intervention of such a body of men the legislative policy 
with respect to combinations and monopolies could be vastly more 
effectual than through the courts alone, which in most cases will take 
no cognizance of violations of the law for months or years after the 
violations occurred, and when the difficulty of awarding reparation 


6 


FEDERAL TRADE COMMISSION. 


for the wrong is almost insurmountable”; and also, with reference 
to the disintegration of combinations and the reconstruction of the 
associated corporations upon lawful lines, “It can not be gainsaid 
that a commission, the members of which are in close touch with 
business affairs, and who are intimately acquainted with the com¬ 
mercial situation, might be extremely helpful in the required adjust¬ 
ment.” 

In the additional views of Mr. Newlands, appended to the Cummins 
report, Mr. Newlands declared himself in favor of the immediate 
organization of a trade commission and urged the passage of the 
trade-commission bill which he appended to his views. He quoted 
from previous utterances in the Senate, on January 11, 1911, as 
follows: 

Mr. Newlands. The railroad commission bill furnishes a model for the action 
of Congress upon matters involving minute and scientific investigation. Had 
we followed the same method regarding the trusts that we followed regarding 
railroads, we would have made much better progress in trust regulation. The 
antitrust act was passed 23 years ago, about the same time that the railroad 
commission was organized. The railroad question is practically settled; the 
settlement of the trust question has hardly been commenced. Had we sub¬ 
mitted the administration of the antitrust act to an impartial quasi judicial tri¬ 
bunal similar to the Interstate Commerce Commission instead of to the Attor¬ 
ney General’s Office, with its shifting officials, its varying policies, its lack of 
tradition, record, and precedent, we would by this time have made gratifying 
progress in the regulation and control of trusts, through the quasi judicial in¬ 
vestigations of a competent commission and through legislation based upon its 
recommendations. As it is, with the evasive and shifting incumbency and 
administration of the Attorney General’s Office, oftentimes purely political in 
character, we find that the trusts are more powerful to-day than when the 
antitrust act was passed, and that evils have grown up so interwoven with 
the general business of the country as to make men tremble at the conse¬ 
quence of their disruption. 

No bill was reported under the Clapp resolution and no additional 
action was taken by the Senate, under President Taft’s administra¬ 
tion, regarding trust legislation. 

president Wilson’s administration. 

Under President Wilson’s administration, after the passage of the 
tariff and banking laws at the extra session, the question of trust 
legislation came up at the regular session commencing in Decem¬ 
ber, 1913. President Wilson, assuming that the Judiciary Com¬ 
mittee of the House and the Interstate Commerce Committee of the 
Senate had jurisdiction over the entire subject, conferred with the 
chairmen of these two committees, Mr. Clayton and Mr. Newlands, 
with reference to framing the tentative measures which would be 
submitted to the committees for consideration. Meanwhile the Presi¬ 
dent delivered his message of January 20, 1914, regarding antitrust 
legislation, in which, after recommending legislation as to" interlock¬ 
ing directorates, holding companies, and other matters, he took up 
the question of a trade commission, as follows: 

The business of the country awaits also, has long awaited and has suffered 
because it could not obtain, further and more explicit legislative definition of 
the policy and meaning of the existing antitrust law. Nothing hampers business 
like uncertainty. Nothing daunts or discourages it like the necessity to take 
chances, to run the risk of falling under the condemnation of the law before 
it can make sure just what the law is. Surely we are sufficiently familiar 
with the actual processes and methods of monopoly and of the many hurtful 


FEDERAL TRADE COMMISSION. 


7 


restraints of trade to make definition possible, at any rate up to the limits of 
what experience has disclosed. These practices, being now abundantly dis¬ 
closed, can be explicitly and item by item forbidden by statute in such terms 
ns will practically eliminate uncertainty, the law itself and the penalty being 
made equally plain. 

And the business men of the country desire something more than that the 
menace of legal process in these matters be made explicit and intelligible. They 
desire the advice, the definite guidance and information which can be supplied 
by an administrative body, an interstate trade commission. 

The opinion of the country would instantly approve of such a commission. 
It would not wish to see it empowered to make terms with monoply or in any 
sort to assume control of business, as if the Government made itself responsible. 
It demands such a commission only as an indispensable instrument of in¬ 
formation and publicity, as a clearing house for the facts by which both the 
public mind and the managers of great business undertakings should be guided, 
and as an instrumentality for doing justice to business where the processes 
of the courts or the natural forces of correction outside the courts are inade¬ 
quate to adjust the remedy to the wrong in a way that will meet all the 
equities and circumstances of the case. 

Producing industries, for example, which have passed the point up to which 
combination may be consistent with the public interest and the freedom of 
trade, can not always be dissected into their component units as readily as 
railroad companies or similar organizations can be. Their dissolution by 
ordinary legal process may oftentimes involve financial consequences likely to 
overwhelm the security market and bring upon it breakdown and confusion. 
There ought to be an administrative commission capable of directing and shap¬ 
ing such corrective processes, not only in aid of the courts but also by inde¬ 
pendent suggestion, if necessary. 

TENTATIVE BILLS. 

Later on, as the result of an understanding between Mr. Clayton, 
chairman of the House Committee on the Judiciary, and Mr. New- 
lands, chairman of the Senate Committee on Interstate Commerce, a 
bill was introduced on the same day, by Mr. Clayton in the House 
and by Mr. Newlands in the Senate—H. R. 12120 and S. 4160. 

With reference to this bill, Mr. Clayton caused to be published in 
the Congressional Record on the 22d day of January, 1014, the fol¬ 
lowing press dispatch: 

Representative Clayton this afternoon gave to the press the full text of the 
tentative bill as agreed upon by a subcommittee of the Judiciary Committee of 
the House (Messrs. Clayton, Carlin, and Floyd of Arkansas) and the majority 
members of the Senate Committee on Interstate Commerce, and said: 

“ The bill will be introduced at the same time by Reprsentative Clayton and 
Senator Newlands. The bill is modeled after the lines of what is commonly 
known as the Newlands bill, which was introduced in the Senate by Senator 
Newlands, and Involves the fundamental idea that a trade commission shall be 
created, consisting of five members, with full inquisitorial powers into the 
operation and organization of all corporations engaged in interstate commerce, 
other than common carriers. It provides for a commission of five members, 
makes the Commissioner of Corporations chairman of the board, and transfers 
all the existing powers of that bureau to the commission. Its relation to the 
Attorney General’s office and to the courts is advisory. Its principal and most 
important duty, besides conducting investigations, will be to aid the courts, 
wdien requested, in the formation of decrees of dissolution, and with this end 
in view it empowers the courts lo refer any part of pending litigation to the 
commission, including the proposed decree, for information and advice.” 

Senator Newlands, being interviewed, said: 

“The trade-commission bill and several other bills limiting the debatable 
ground of the Sherman Act have been the subject of laborious consideration by 
a subcommittee of the Judiciary Committee of the House (consisting of Mr, 
Clayton, chairman, and Messrs. Carlin and Floyd of Arkansas) during the holi¬ 
days and before. The majority members of the Interstate Commerce Com¬ 
mittee of the Senate have been brought into consultation with them of late. 


8 


JEDEBAL TEADE COMMISSION. 


“ The trade-commission bill preserves the essential features of the bill which 
I have been urging for some time, but contains amendments and additions of 
value and is, in my judgment, an improvement upon the bill as it was con¬ 
sidered and improved by the Interstate Commerce Committee of the Senate 
during the last Congress. As a whole, I should say that the trade-commission 
bill ought to be satisfactory to members of all parties, for it is distinctively 
progressive, and we have endeavored to frame it in harmony with the Presi¬ 
dent’s views, presented in an admirable message, which has received the ap¬ 
proval of the entire country, regardless of party. While these bills represent 
at present the best thought of the participants in the shaping of this legislation, 
they are presented simply as tentative measures, upon which the judgment of 
the proper committees of the House and Senate and of the country is invoked.” 

f , THE HOUSE BILL. 

The House bill, H. R. 12120, introduced by Mr. Clayton, was not 
referred, however, to the Judiciary Committee, but to the Committee 
on Interstate and Foreign Commerce. The Senate bill, S. 4160, 
introduced by Mr. Newlands, was referred to the Interstate Com¬ 
merce Committee of the Senate. 

Later on a bill was introduced by Mr. Covington, of the House 
Committee on Interstate and Foreign Commerce (H. R. 15613) for 
the creation of an interstate trade commission, on the 13th day 
of April, 1914, covering in substance the same lines as the Clayton 
bill, but differing in detail and method. This bill was taken up for 
consideration by the House Committee on Interstate and Foreign 
Commerce, and after amendment by the committee was reported 
favorably and passed by the House on the 5th day of June, 1914. 

THE SENATE BILL. 

Meanwhile, however, the Senate Committee on Interstate Com¬ 
merce had been considering Senate bill 4160, introduced by Mr. 
Newlands, and had, on the 5th day of June (calendar day June 6), 
1914, after amending this measure, reported it favorably to the 
Senate. Later on the House bill, H. R. 15613, came over to the 
Senate and was referred to the Committee on Interstate Commerce. 

The Senate committee reports the House bill with the recommenda¬ 
tion that Senate bill 4160, as amended, be substituted for it, adding 
thereto amendments regarding the investigation of foreign trade 
practices and unfair competition. 

AN ADMINISTRATIVE TRIBUNAL NEEDED. 

Recent decisions of the Supreme Court make clear that all combi¬ 
nations in restraint of trade and monopolies are contrary to the law. 
All agree that while the Sherman, law 7 is the foundation stone of our 
policy on this question, additional legislation is necessary. 

Experience in the execution of the law, however, as shown in the 
Standard Oil and American Tobacco decrees of dissolution, and in 
the frequent efforts of combinations to make voluntary adjustment 
with the Department of Justice, establishes that the question involved 
is administrative as well as legislative and judicial. 

It is generally conceded that the peculiar character and importance 
of this question make it indispensable that some of the administra¬ 
tive functions should be lodged in a body specially competent to deal 


FEDERAL TRADE COMMISSION. 


9 


with them, by reason of information, experience, and careful study 
of the business and economic conditions of the industry affected. 
The knowledge of the law and the information as to the facts which 
are essential to prove that a combination is repugnant to the law are 
not likely to be entirely adequate for the determination of the best 
form of dissolution, and this has been recognized both by the 
Supreme Court and by the Department of Justice. Preliminary to the 
judicial determination of such questions as arise, for example, in the 
examination of proposals for a voluntary dissolution of a combina¬ 
tion or in testing the lawfulness of existing business arrangements, 
a vast mass of information in numerous branches of industry, as 
well as expert knowledge, is indispensable. The proper enforcement 
of the Sherman law also requires vigilant supervision which is most 
effectively obtained by a body in continual touch with the business 
organizations in the various industries. 

The value of such administrative oversight and control has been 
recognized in the banking and transportation business, and we have 
in the Comptroller of the Currency, the newly created Federal Re¬ 
serve Board, and the Interstate Commerce Commission practical 
illustrations of the operation of such organizations and frequent 
examples of the beneficial effects of their activity. As the general 
realization of these facts is widespread and confined to no one par¬ 
ticular party, the introduction of this bill for a trade commission 
simply responds to a general need. 

THE BUREAU OF CORPORATIONS. 

While the Bureau of Corporations, which was established by an 
act of February 14, 1903, provided in some measure for the needs now 
generally recognized and has been of great value and public benefit 
in describing in detail the conditions in particular industries, and 
the organization, operation, and conduct of particular companies, the 
field which has been covered has necessarily been restricted and its 
organization as a division of an executive department under a single 
head, reporting only to the President, has not given to it either the 
authority or prestige which attaches to an independent commission, 
such as the Interstate Commerce Commission. Yet the need of such 
a position is quite as necessary in the governmental supervision of 
industrial activities as of railroads. 

The establishment of a trade commission at the same time that the 
Interstate Commerce Commission was established would have pre¬ 
vented the extraordinary development of monopolistic organizations 
in industry. If this commission had been in existence during this 
period, we would not now have to deal with such organizations as 
the United States Steel Corporation, the International Harvester 
Co., or the American Sugar Refining Co.; the American Tobacco Co. 
would never have been organized, and even the Standard Oil Co. 
would not have survived the dissolution of the original Standard 
Oil Trust in 1892. Such a commission would have at least kept 
within limited bounds the activities of a multitude of price-fixing 
associations in different branches of business, which, together with 
the great trusts, have been potent causes of the present high cost of 
living. 


10 


FEDERAL TRADE COMMISSION. 


/ 


OPPOSING THEORIES REGARDING A TRADE COMMISSION. 

With the development of public sentiment on the subject of a trade 
commission, points of view have naturally changed with respect to 
particular provisions, and differences have also appeared with respect 
to the extent of the power to be lodged with such a commission. 
Some would found such a commission upon the theory that monopo¬ 
listic industry is the ultimate result of economic evolution and that it 
should be so recognized and declared to be vested with a public inter¬ 
est and as such regulated by a commission. This contemplates even 
the regulation of prices. Others hold that private monopoly is in¬ 
tolerable, unscientific, and abnormal, but recognize that a commission 
is a necessary adjunct to the preservation of competition and to the 
practical enforcement of the law. The functions of such commis^ 
sions would be as distinct and different as the ideas upon which they 
are founded. 

The commission which is proposed by your committee in the bill 
submitted is founded upon the latter purpose and idea. It certainly 
would appear to be the part of wisdom in so important a situation to 
proceed carefully, and with that end in view the committee has aimed 
to provide a body which will have sufficient power ancillary to the 
Department of Justice to aid materially and practically in the en¬ 
forcement of the Sherman law and to aid the business public as well, 
and, incidentally, to build up a comprehensive body of information 
for the use and advantage of the Government and the business w T orld. 
Its subsequent recommendations to Congress will be fortified with 
actual knowledge of practical conditions, both from the point of view 
of business desirability and economic tendency, and will furnish to 
Congress an analysis of conditions that will give other and further 
legislation the certainty and security of foundation commensurate 
with the vast interests of the public and of the business world which 
are at stake. If conditions demonstrate and warrant, there will be a 
natural growth in the power of this body. At the same time the bill 
clothes it with sufficient power to be, we believe, of material assistance 
to the Department of Justice in the enforcement of the Sherman law, 
and of material aid to the business world in building up a body of 
precedent in the matter of business practices. 

Proceeding now to a brief consideration of the principal provi¬ 
sions of the present bill and some of the more important considera¬ 
tions which have determined its form, it is necessary to consider the 
constitution of the commission; the corporations, etc., placed under 
its jurisdiction; the powers of inquiry, etc., of the commission, and 
other powers. 


CONSTITUTION OF COMMISSION. 

It is provided that the commission shall be composed of five com¬ 
missioners with a regular term of seven years, but the terms are so 
arranged that the whole membership will not be subject to a com¬ 
plete change at any one time. The work of this commission will 
be of a most exacting and difficult character, demanding persons who 
have experience in the problems to be met—that is, a proper knowl¬ 
edge of both the public requirements and the practical affairs of 
industry. It is manifestly desirable that the terms of the commis- 


FEDERAL TRADE COMMISSION. 


11 


sioners shall be long enough to give them an opportunity to acquire 
the expertness in dealing with these special questions concerning 
industry that comes from experience. The terms of the commis¬ 
sioners should expire in different years, in order that such changes 
as may be made from time to time shall not leave the commission 
deprived of men of experience in such questions. 

One of the chief advantages of the proposed commission over the 
Bureau of Corporations lies in the fact that it will have greater pres¬ 
tige and independence, and its decisions, coming from a board of 
several persons, will be more readily accepted as impartial and well 
considered. For this reason also it is essential that it should not be 
open to the suspicion of partisan direction, and this bill provides, 
therefore, that not more than three members of the commission shall 
belong to any one political party. 

The salary proposed for each commissioner is $10,000 per annum, 
which is the same salary as is provided for the Interstate Commerce 
Commission, and $2,000 per annum less than that of the members of 
the Federal Reserve Board under the currency law recently enacted. 
It would seem desirable that the salaries of the two commissions 
should be made equal to those of the reserve board. It is of para¬ 
mount importance that men of the first order of ability should be 
attracted to these positions, and that service on this body should not 
entail too great a sacrifice to those who would serve thereon. A com¬ 
mission of this kind requires an unusual combination of qualifica¬ 
tions. It requires not only a conversant knowledge with finance and 
transportation, but also a very comprehensive knowledge of the 
practical economic and legal aspects of the whole field of industry 
of the country, and exceptional experience, training, and judgment. 

The absorption of the Bureau of Corporations by the commission, 
already alluded to, is a matter of such obvious desirability that it 
does not require any extended discussion. The work done by that 
bureau has demonstrated the ability of its staff, while its 10 years’ 
experience in work along this line will be of great value to the pro¬ 
posed commission. 

POWERS OF INVESTIGATION AND REPORTS. 

Specifically subject to the jurisdiction of this commission are all 
corporations, trade associations, and corporate combinations engaged 
in interstate and foreign commerce, excepting banks and common 

carriers. * . 

The commission has power to investigate the organization, busi¬ 
ness, financial condition, conduct, practices, and management of any 
corporation subject to the act which it may designate, and its rela¬ 
tion to other corporations and to individuals, associations, and part¬ 
nerships, and in aid thereof to require the production of informa¬ 
tion, statements, and records and the examination of books, docu¬ 
ments, correspondence, contracts, etc., affecting the commerce in 
which such corporation is engaged, and to require annual or special 
reports from such corporations or classes of corporations as the com¬ 
mission may designate. The commission may make public any in¬ 
formation obtained by it except as to trade processes,, names of cus¬ 
tomers, and other matters not deemed to be of public importance; 


12 


FEDERAL TRADE COMMISSION. 


and may also make annual and special reports to Congress, including 
recommendations for additional legislation. 

It will be seen that while large powers of investigation are given, 
they are not greatly in excess of those possessed and for years ex¬ 
ercised by the Bureau of Corporations. Reports are required only 
from such corporations or classes of corporations as may be desig¬ 
nated by the commission. There are over 350,000 corporations in this 
country, of which perhaps a large proportion may be engaged in 
interstate trade, but it must be realized that the number affected by 
the proposed legislation will not exceed 1,000. The powers, of 
course, must be large, but the exercise of the powers will not be 
against law-abiding business, but against lawless business. It will be 
persuasive and corrective rather than punitive so far as well-inten¬ 
tioned business is concerned. Although the commission is given a 
wide discretion, experience has proved that governmental admin¬ 
istrative bodies seldom abuse such authority. To attempt to make 
precise limits between what they may and what they may not do 
would often seriously hamper their successful administration. To 
almost every inquiry it might be possible to make specious objections 
which, while lacking any real merit, might effectually clog the con¬ 
duct of the inquiry. The committee carefully considered the question 
as to whether it should limit the powers of the commission to the con¬ 
duct of the large corporations, but it was deemed important that 
the commission should be able to get information from the small 
concerns as well as from the large ones, inasmuch as a corporation 
of small capital might be made the instrumentality of large monopo¬ 
listic control. 

POWER TO AID THE COURTS. 

The commission is also authorized to aid the courts in the form of 
the decree to be entered in suits under the antitrust acts and to make 
investigation as to the manner in which such decrees are being car¬ 
ried out, as to whether they are being violated, and what, if any, 
further order, decree, or relief is advisable, reporting its findings 
on these subjects to the Attorney General. It is also authorized, if 
it believes from its inquiries that any corporation has violated any 
law of the United States regulating commerce, to report its findings 
and the evidence relating thereto to the Attorney General. 

These powers, partly administrative and partly quasi judicial, are 
of great importance and will bring both to the Attorney General and 
to the court the aid of special expert experience and training in mat¬ 
ters regarding which neither the Department of Justice nor the 
courts can be expected to be proficient. 

With the exception of the Knight case, the Supreme Court has 
never failed to condemn and to break up any organization formed in 
violation of the Sherman law which has been brought to its atten¬ 
tion; but the decrees of the court, while declaring the law satis¬ 
factorily as to the dissolution of the combinations, have apparently 
failed in many instances in their accomplishment simply because 
the courts and the Department of Justice have lacked the expert 
knowledge and experience necessary to be applied to the dissolution 
of the combinations and the reassembling of the divided elements in 
harmony with the spirit of the law. 


FEDERAL TRADE COMMISSION. 


13 


TRADE CONDITIONS ABROAD. 

The commission is also authorized to investigate trade conditions 
in foreign countries injuriously affecting the export trade of the 
United States, as well as whether American exporters have combined 
w T ith each other or with foreign producers or dealers to control prices 
abroad. 


' UNFAIR COMPETITION. 

One of the most important provisions of the bill is that which 
declares unfair competition in commerce to be unlawful, and em¬ 
powers the commission to prevent corporations from using unfair 
methods of competition in commerce by orders issued after hearing, 
restraining, and prohibiting unfair methods of competition, which 
orders are enforceable in the courts. 

The committee gave careful consideration to the question as to 
whether it would attempt to define the many and variable unfair 
practices which prevail in commerce and to forbid their continuance 
or whether it would, by a general declaration condemning unfair 
practices, leave it to the commission to determine what 'practices were 
unfair. It concluded that the latter course would be the better, for 
the reason, as stated by one of the representatives of the Illinois 
Manufacturers’ Association, that there were too many unfair prac¬ 
tices to define, and after writing 20 of them into the law it would 
be quite possible to invent others. 

It may be stated that representatives of the National Implement 
and Vehicle Manufacturers’ Association, the Ohio Manufacturers’ 
Association, and the Illinois Manufacturers’Association approved the 
passage of a trade commission bill and a provision regarding the 
inquiry into and condemnation of unfair practices in trade. 

It is believed that the term “ unfair competition ” has a legal sig¬ 
nificance which can be enforced by the commission and the courts, 
and that it is no more difficult to determine what is unfair competition 
than it is to determine what is a reasonable rate or what is an unjust 
discrimination. The committee was of the opinion that it would be 
better to put in a general provision condemning unfair competition 
than to attempt to define the numerous unfair practices, such as local 
price cutting, interlocking directorates, and holding companies in¬ 
tended to restrain substantial competition. 

SUBPOENA AND IMMUNITY. 

In verifying the returns made by a corporation or in the conduct 
of such special investigations as the commission may deem necessary, 
it is indispensable that it should have extensive powers of inquiry, 
with the right to subpoena witnesses and to require the production of 
books and papers. The powers which, according to this bill, are 
granted to the commission, are practically the same as those now 
granted to the Interstate Commerce Commission or the Bureau of 
Corporations, while the same constitutional protection is given to 
witnesses who testify as to matters which might incriminate them. 

The history of this legislation is given with particularity, so that 
Members of the Senate may have before them the gradual evolution 


14 


FEDERAL TRADE COMMISSION. 


of the measure and may consult the records referred to at any stage 
of the proceedings. 

It demonstrates that legislation regarding the organization of a 
trade commission has been the subject of consideration in the Sen¬ 
ate Committee on Interstate Commerce for over three years, and in 
two important committees of the House for a period of over six 
months, during which period exhaustive hearings were had. 

The legislation proposed is in line with the constantly increasing 
popular sentiment, as is demonstrated by the recent poll of the 
Chamber of Commerce of the United States, which declared over¬ 
whelmingly for such action. No contention can be made that the 
work of Congress on this subject has been hasty or immature. It 
has not been in advance of public sentiment, but rather has lagged 
behind. 


APPENDIX. 


Hearing Before the Senate Committee on Interstate Commerce. 

[Friday, August 4, 1911.] 


United States Senate, 
Committee on Interstate Commerce, 

Washington, D. 0. 

A TRADE COMMISSION-MR. NEWLANDS’s STATEMENT. 


The committee met at 10 o’clock a. m. for the purpose of consid¬ 
ering Senate bill No. 2941, Sixty-second Congress, second session, 
introduced by Mr. Newlands on the 5th day of July, 1911, entitled 
“A bill to create an interstate trade commission, to define its powers 
and duties, and for other purposes.” 

Present: Senators Clapp (chairman), Crane, Cummins, Brandegee, 
Oliver, Lippitt, Townsend, Newlands, Clarke, Watson, and Pomerene. 

The Chairman. The secretary will read the authority under which 
the committee acts. 

(The secretary read as follows:) 

In the Senate of the United States, 

July 26, 1911 . 

Resolved, That the Committee on Interstate Commerce is hereby authorized 
and directed, by subcommittee or otherwise, to inquire into and report to the 
Senate at the earliest date practicable what changes are necessary or desirable 
in the laws of the United States relating to the creation and control of corpora¬ 
tions engaged in interstate commerce, and what changes are necessary or desir¬ 
able in the laws of the United States relating to persons or firms engaged in 
interstate commerce, and for this purpose they are authorized to sit during the 
sessions or recesses of Congress, at such times and places as they may deem 
desirable or practicable; to send for persons and papers, to administer oaths, 
to summon and compel the attendance of witnesses, to conduct hearings and 
have reports of same printed for use, and to employ such clerks, stenographers, 
and other assistants as shall be necessary, and any expense in connection with 
such inquiry shall be paid out of the contingent fund of the Senate upon 
vouchers to be approved by the chairman of the committee. 

Attest: 

Charles G. Bennett, Secretary. 

The Chairman. You may proceed, Senator Newlands. What is 
the number of your original bill ? 

Mr. Newlands. No. 2941, introduced July 5, 1911. 

Note. —Since the date of this hearing Mr. Newlands withdrew the bill in its 
original form, and on August 21, 1911, introduced a substitute therefor, bearing 

15 



16 


APPENDIX. 


the same number (S. 2941), with the same title and purpose. The said substi¬ 
tute bill is as follows: 

[S. 2941, Sixty-second Congress, first session.] 

A BILL To create an interstate trade commission, to define its powers and duties, and for 

other purposes. 

Be it enacted by the Senate and Home of Representatives of the United 
State of America in Congress assembled, That this act shall be referred to and 
cited as the interstate trade commission act. Corporations a majority of whose 
Voting securities is held or owned by any corporation subject to the terms of 
sections four or sixteen of this act are referred to herein as subsidiaries of 
such holding or owning corporation. 

Sp:c. 2. That on and after day of . nineteen hundred and twelve, 

the Bureau of Corporations shall be separated from the Department of Com¬ 
merce and Labor, and shall be thereafter known as the Interstate Trade Com¬ 
mission; and all of the powers, duties, and funds belonging or pertaining to the 
Bureau of Corporations shall thereafter belong and pertain to the Interstate 
Trade Commission. And all the officials and employees of said bureau shall 
be thereupon transferred to the Interstate Trade Commission. The said com¬ 
mission shall also have a secretary, a chief clerk, and such other and additional 
employees as shall be provided by law. 

Sec. 3. That tbe Interstate Trade Commission shall consist of five members, 
of whom no more than three shall belong to the same political party. The Com¬ 
missioner of Corporations holding tbe office on the said day of , 

nineteen hundred and twelve, shall be ex officio a member of the commission for 
the first two years of its existence, and shall also be chairman of the commis¬ 
sion for the first year of its existence, and thereafter the chairman shall be 
selected annually by the commission from its membership; and the then Deputy 
Commissioner of Corporations shall be the secretary of the commission for the 
first year of its existence, and thereafter tbe secretary shall be selected by the 
commission; and after the organization of the commission the titles and offices 
of Commissioner of Corporations and Deputy Commissioner of Corporations, 
respectively, shall cease to exist. The remaining four members of the com¬ 
mission shall be appointed by the President, by and with the advice and consent 
of the Senate, and the terms of such commissiners so first appointed shall be 
four, six, eight, and ten years, respectively, and shall be so designated by the 
President in making such appointments; and thereafter all the commissioners 
shall hold office for the term of ten years, and shall be appointed by the Presi¬ 
dent, by and with the advice and consent of the Senate. Each member of said 
commission shall receive a salary of ten thousand dollars a year. The secre¬ 
tary shall receive a salary of thousand dollars a year. 

Sec. 4. That every corporation heretofore or hereafter organized within the 
United States or doing business therein whose annual gross receipts, inclusive 
of the annual gross receipts of its subsidiaries, if any, exceed five million 
dollars, and engaged in commerce among the several States or with foreign 
nations, excepting corporations subject to the act to regulate commerce, ap¬ 
proved February fourth, eighteen hundred and eighty-seven, as amended, 
but including pipe-line companies, shall within four months after this act 
takes effect, or, if organized or otherwise becoming subject to this act sub¬ 
sequent to such taking effect hereof, then within two months after so becom¬ 
ing subject to this act furnish to the commission in writing statements show¬ 
ing such facts as to its organization, financial condition, and operations as 
may be prescribed by regulations to be made in pursuance of this act. Similar 
statements shall be made by its subsidiaries. Such statements shall be made 
as of such date as may be prescribed by such regulations and shall be verified 
under oath by such officers of such corporation as may be prescribed by the 
said regulations. Failure or neglect on the part of any corporation subject to 
this section to comply with the terms hereof within sixty days after written 
demand shall have been made upon such corporation by the commission, requir¬ 
ing such compliance, shall constitute a misdemeanor, and upon conviction such 
corporation shall be subject to a fine of not more than one thousand dollars for 
every day of such failure or neglect. 

Sec. 5. That the said commission, upon finding that said statements comply 
wfitli such regulations so far as applicable to such statements, shall enter such 
corporation for United States registration upon books to be kept by it for that 
purpose, and shall also record the statements so filed. 


APPENDIX. 


17 


Sec. G. That all corporations so admitted to registration shall be known as 
“United. Slates registered” companies, and shall have the sole and exclusive 
right to use, in connection with their corporate title, their securities, their opera¬ 
tions, and by way of advertisement of their business, the title “ United States 
registered,” or any convenient abbreviation thereof, so long as such registration 
shall remain in force. 

Sec. 7. That any person, corporation, or company willfully using or publishing 
such title of “ United States registered,” or any title or form of words or letters 
reasonably indicative thereof, in connection with the business or securities or 
name of any corporation, with intent to represent thereby that such corporation 
is at that time registered as provided in this act, shall, unless such corporation 
be at that time duly registered under the terms of this act, be guilty of a 
misdemeanor, and upon the conviction thereof shall be subject to a fine of not 
more than one thousand dollars, and each day of such use or publication shall 
constitute a separate offense. 

Sec. 8. That all corporations subject to this act and their respective sub¬ 
sidiaries shall from time to time furnish to the commission such information, 
statements, and records of their organization, business, financial condition, con¬ 
duct. and management, at such times, to such degree and extent, and in such 
form as may be prescribed by the said regulations to be made under this act, 
and shall at all reasonable times grant to the commission, or its duly authorized 
agent or agents, complete access to all their records, accounts, minutes, books, 
and papers, including the records of any of their executive or other committees. 

Sec. 9 . That the commission shall from time to time make public the informa¬ 
tion received under this act, in such form and to such extent as shall he pre¬ 
scribed by the sa : d regulations: Provided, however. That s id regulations shall 
so far as possible, distinguish between information which is purely private, 
and the publication of which can serve no public interest, and such information 
as is not so private and is of importance to the public. 

Sec. 10. The s- id commission may at any time, upon complaint of any person, 
corporation, or body, or upon its own initiative, revoke and cancel the regis¬ 
tration of any corporation registered under this act upon the ground of either 
violation of any operative judicial decree rendered under an act to protect 
trade and commerce against unlawful restraints and monopolies, approved July 
second, eighteen hundred and ninety, or under sections seventy-three to seventy- 
seven, inclusive, of an act to reduce taxation, to provide revenue for the 
Government, and for other purposes, which became a law August twenty- 
seventh, eighteen hundred and ninety-four, or of the use of materially unfair 
or oppressive methods of competition, or of the acceptance of discriminations, 
rebates, and concessions from the lawful tariff rates of common carriers, or 
on the ground of refusal or neglect to allow the commission access to its records 
< r papers as provided in section eight tlierof. The commission shall also care¬ 
fully investigate the capitalization and assets of the corporations registered 
under this act, and after due consideration of the information so obtained and 
otherwise secured, and after allowing reasonable time for the readjustment of 
corporate organization and security issues in any given case or class of cases, 
may revoke the registration of any such corporation upon the ground of over- 
capitalization: that is to say, upon the ground that the par value of the total 
securities, including shares of stock and all obligations running for a term of 
years or more, of such corporation, issued and outstanding at any. time 
clearly exceeds the true value of the property of the corporation at that time. 
In determining such true value the said commission shall consider the original 
cost of such property, its present replacement cost, its present market value, 
including the good will of the corpoiation’s business and the market value of 
the said securities issued by the corporation, and the fair value of the services 
rendered* in the organization of such corporation, but the said commission shall 
also, as far as possible, segregate and disallow from such determination all 
value attaching to such property or business due solely to monopolistic power 
(other than patent rights or other legal franchises, the true value of which shall 
be considered by the commission). The said commission in considering revoca¬ 
tion of registration under this section shall give such notice and have power to 
take such evidence and hold such hearings as may be prescribed by the regula¬ 
tions issued under this act: Provided. That if any subsidiary of a corporation 
so registeied shall be guilty of conduct hereinbefore specified in this secUon as 
ground for cancellation of registration, such conduct on the part of such sub- 

S. Kept. r>97, 03-2-2 


18 


APPENDIX. 


sidiary shall be ground for canceling the registration of the corporation to 
which it is so subsidiary. 

Sec. 11. That in case of revocation of the registration of any corporation the 
commission may also order that such corporation thereafter shall not engage in 
interstate commerce. For every day’s continuance in such commerce contrary 
to such order such corporation shall be subject to a fine of not more than one 
thousand dollars. The district courts of the United States, upon the application 
of said commission, alleging a failure to comply with such order of the commis¬ 
sion, or alleging a failure to comply with or a violation of any of the provisions 
of this act, by any corporation subject thereto, shall have jurisdiction to issue a 
writ or writs of mandamus or injunction, or other order enforcing such order 
of the commission or commanding such corporation to comply with the provi¬ 
sions of this act. 

Sec. 12. That the said commission may at any time, upon application by a 
corporation whose. registration has been previously canceled, reinstate said 
corporation for registration and grant it registration anew: Provided, That the 
said commission is satisfied that the cause or causes for which registration was 
revoked no longer exist and that the commission shall find that all the require¬ 
ments for registration as set forth in section four shall have been complied 
with anew as of the date of the new application for registration. 

Sec. 13. That the said commission may at any time, if in the opinion of the 
commission public necessity requires such action, order and require any cor¬ 
poration engaged in commerce among the several States or with fdreign na¬ 
tions, except corporations subject to the act to regulate commerce, approved 
February fourth, eighteen hundred and eighty-seven, as amended, but includ¬ 
ing pipe-line companies, to make such statements and give such information 
as is prescribed in sections four and eight of this act, which information shall 
be published in accordance with the provisions of section nine hereof. The 
commission may also obtain from any such corporation, through the powers 
granted in section fourteen hereof, such information as shall enable said com¬ 
mission to determine whether such corporation is subject to the terms of this 
act. Tne decisions of the said commission made under the powers conferred 
upon it in this act shall be final except as to matters involving the taking of 
private property without due process of law and involving the extent and 
character of the said powers so conferred herein: Provided , however, That 
an appeal may be taken in equity to any district court of the United States 
from any order or decision of the said commission made under section eleven of 
this act 

Sec. 14. That in order to accomplish the purposes declared in sections eight 
and thirteen of this act the said commission shall have and exercise the same 
power and authority in respect to corporations subject to this act as is conferred 
on the Interstate Commerce Commission in said act to regulate commerce and the 
amendments thereto in respect to common carriers, so far as the same may be 
applicable, including the right to subpoena and compel the attendance and testi¬ 
mony of witnesses and the production of documentary evidence and to adminis¬ 
ter oaths. All the requirements, obligations, liabilities, and immunities imposed 
or conferred by said act to regulate commerce and by an act in relation to testi¬ 
mony before the Interstate Commerce Commission, and so forth, approved Feb¬ 
ruary eleventh, eighteen hundred and ninety-three, supplementary to said act to 
regulate commerce, and the act defining immunity, approved June thirtieth, 
nineteen hundred and six, shall also apply to all persons who may be subpoenaed 
to testify as witnesses or to produce documentary evidence in pursuance of the 
authority conferred by sections eight and thirteen hereof. 

Sec. 15. That the said commission shall, or or before the day of 
in each year, make a report, which shall be transmitted to Congress. This 
report shall contain such information and data collected by the commission as 
it may deem of value in the determination of questions connected with the 
regulation of commerce, together with such recommendations as to additional 
legislation relating thereto as the commission may deem necessary. 

Sec. 16. That any corporation engaged in commerce among the several States 
or with foreign nations the amount of whose gross annual receipts, inclusive 
of those of its subsidiaries, shall be less than five million dollars and more 
than one million dollars may also, by complying and continuing to comply 
with the terms of sections four, eight, and nine hereof, acquire and maintain 
United States registration as provided in sections five and six, subject to the 
provision for cancellation thereof prescribed in section ten; and the information 
furnished by such corporation shall be subject to the provisions of section nine. 


APPENDIX. 


19 


Sf.c. li. That the said commission shall have power to make any and all 
regulations necessary and proper to carry out the purposes of this act, and at 
any time to alter, amend, or repeal the same or any part thereof. 

Sec. IS. That any person willfully making or furnishing to said commission 
any statement, return, or record required by this act, when knowing such state¬ 
ment, return, or record to be false in any material particular, shall be guilty 
of a misdemeanor, and upon conviction shall be lined not more than oni* 
thousand dollars or imprisoned not more than one year, or both. 

Mr. Newlands. Gentlemen of the committee, for some years I have 
been giving consideration to this particular question and have fre¬ 
quently expressed the conviction that it was imperatively necessary to 
create an administrative tribunal vested with the powers of investi¬ 
gation, publicity, correction, and recommendation in the case of large 
industrial corporations similar to those exercised by the Interstate 
Commerce Commission over railroads. On several occasions I have 
spoken upon this subject on the floor of the Senate; particularly 
just before the decision in the Standard Oil case was rendered. (The 
decisions in the Standard Oil and American Tobacco Co. cases were 
handed down May 15 and May 29, 1911, respectively.) 

In a speech in the Senate on January 11, 1911, upon the Tariff 
Commission I outlined my views as to an Interstate Trade Commis¬ 
sion. With the permission of the committee, I will insert these 
remarks in the printed hearing. (See Mr. Newlands’s views in Cum¬ 
mins’s report, appendix, p. 35.) 

After the call of the extra session, but before its convening, I wrote 
to the Hon. Champ Clark, who was destined to be the Speaker of 
the House of Representatives at the extra session, a letter, which 
appears in the Senate proceedings (Congressional Record) of May 
15, 1911, and in which I outlined a legislative program for the 
extra session. 

The purpose of the program and the necessity for thorough legisla¬ 
tion upon the question of interstate transportation, or the railroads; 
interstate trade, or the trusts; and interstate exchange, or banking— 
all of them interrelated as parts of interstate commerce—were re¬ 
ferred to in this letter; but I will insert in the record simply that part 
which is relevant to this present discussion and to interstate trade: 

United States Senate. 

Washington, D. G., March 15, 1911. 

Hon. Champ Clark, 

House of Representatives, Washington, D. G. 

My Dear Mr. Clark: The extra session is now approaching; the House is 
Democratic, the Senate and the Executive department are Republican. Under 
this condition of divided responsibility the question arises as to what policy the 
Democratic Party shall pursue. It has already been practically determined that 
the House will take up, in addition to the reciprocity treaty, the tariff; and the 
question is whether it will take up other matters of reform and constructive leg¬ 
islation, and, with a view thereto, select the committees necessary to the con¬ 
sideration of such measures. The Senate will probably follow the lead of the 
House in this particular. 

I hope, theiefore, that it will not be regarded as intrusive if I, in common with 
other Democrats venture a few suggestions on this score, as the question is of 
the highest importance to Democracy generally. * * * 

interstate trade, or the trusts. 

The interstate-commerce act for the regulation of railroads and the antitrust 
act for the prohibition of trusts were passed about the same time. The admin¬ 
istration of the former was given to a quasi judicial board; the administration 
of the latter was given to the Attorney General's Office. After about 23 years 


20 


APPENDIX. 


of operation, through a gradual process of evolution, the regulation of railroads 
engaged in interstate commerce has practically been accomplished. * * * 

The administration of the antitrust act, on the contrary, has been lame and 
halting, changing with the shifting incumbents of the Attorney General’s Office, 
and according to requirements of political exigencies. As a result, prac¬ 
tically no progress has been made in the control of the trusts, and whilst a few 
suits have been prosecuted to a successful result and others are now in process 
of prosecution, there exist to-day over 800 trust organizations of enormous capi¬ 
talization practically without regulation or control. Experience should teach 
us that with reference to interstate trade a commission or board should be 
organized similar to the Interstate Commerce Commission, with powers of inves¬ 
tigation, of condemnation, and of recommendation, and with a view, whilst pre¬ 
serving the good arising from commercial combination, to curing the pernicious 
practices connected therewith. Such legislation should include among the 
powers of the commission the power, upon complaint or its own initiative, to 
inquire into the organizaton of all corporations engaged in interstate trade, and 
upon finding that any such organization is unlawful under the terms of the anti¬ 
trust act, to call upon the Attorney General to prosecute the same. 

The interstate trade commission should have a power similar to that of the 
Interstate Commerce Commission of appearing in litigation by its own coun¬ 
sel. * * * 

Such legislation will be necessary whatever may be the action of the Supreme 
Court upon the pending cases. If such combinations are held to be legal, the 
regulation of their prices and practices becomes a public necessity; if they are 
held to be illegal, then there should be some law which, while permitting large 
capitalization and the ownership of many plants by a single corporation engaged 
in interstate trade, will protect the public from the abuses attendant upon such 
large capitalization and the oppression exercised by it. * * * 

Sincerely, yours, 


Francis G. Newlands. 


During the extra session, on May 11, 1911, I presented in the 
Senate a program of legislation to be enacted or considered during 
the extra session. This program provided for nine questions upon 
which legislative action should be.taken before adjournment, and for 
seven questions upon which the action of committees was desirable, 
with a view to early action during the next regular session. 

Under this latter heading, namely, committee consideration, in 
the second subdivision, I suggested the consideration of legislation 
as follows: 


(2) Providing, in connection with the Bureau of Corporations, for a board 
of interstate trade, with powers of examination, condemnation, and recom¬ 
mendation regarding interstate trade similar to those conferred upon the 
Interstate Commerce Commission regarding interstate transportation. 

Later, on May 15, 1911, on the very day that the Standard Oil 
decision was being delivered in the Supreme Court, I spoke in the 
Senate upon the question of a legislative program for the extra 
session, and shall insert in the printed hearings an extract from this 
speech. The matter referred to is as follows: (See Appendix, 
p. 37.) 

On May lb, after the Supreme Court had rendered its decision in 
the Standard Oil case, I continued my remarks of the day previous. 
Addressing myself to the decision of the court, I urged still further 
the necessity for organizing an administrative tribunal for the regu¬ 
lation of corporations engaged in interstate trade. I shall quote quite 
freely from this speech, as it contains quotations from the President, 
and his opinion that to leave the courts to say what is a reasonable 
restraint of trade, what is a reasonable suppression of competition, 
what is a reasonable monopoly, would be “ to thrust upon the courts a 
burden that they have no precedents to enable them to carry, and to 


APPENDIX. 21 

give them a power approaching the arbitrary, the abuse of which 
might involve our judicial system in disaster.” 

I concur emphatically in this view that the courts are not the proper 
medium for exercising such a function. Because, therefore, we have 
clearly reached a point where some branch of the Government must 
do this sort of work, and because, as the President correctly states, 
the courts are not the proper place for it, I am advocating the estab¬ 
lishment, as in this interstate trade commission bill, of an adminis¬ 
trative agency that can perform this duty. 

Again, in a speech upon the subject of a self-governing Senate, 
delivered in the Senate on June 22, 1911, in alluding to the pro¬ 
gram of legislation which I had been urging, I spoke regarding a 
board of interstate trade, and shall insert an excerpt in the record. 
(See appendix, p. 38.) 

Later I drew up this bill and introduced the original on the 5th 
day of July, 1911. During the time I had this bill under considera¬ 
tion I discussed the matter with various persons whom I regarded as 
experts, particularly with members of the Interstate Commerce Com¬ 
mission, the Attorney General, the Commissioner of Corporations, 
the Solicitor General, and lawyers who were engaged in the trust 
prosecutions. I have also talked with men connected with these 
industrial corporations and with eminent economists, and I have 
found everywhere a general acquiescence in the view that something 
in the way of supplemental legislation was required. 

It will be impossible to administer this great and necessary system 
of regulation through the courts. We all know that just as soon as 
these corporations are reorganized under these decisions they will, 
for a time at least, take the form of a large number of corporations, 
limited either in the character of the commodity with which they deal 
or in the area over which they operate. The management of these 
corporations is generally satisfactory to the stockholders; they have 
confidence in the existing management, and in the great financial 
interests and institutions that usually control that management. 
These stockholders will, by their proxies, practically give to those 
controlling interests their votes on anything they desire. So that we 
will eventually have, in these industrial corporations, just as we have 
with railroads, the practical control of all these subdivided corpora¬ 
tions in the hands of a few great financial institutions or groups in 
New York, and they will dictate the membership of the boards and 
the general policy of all these corporations. There will be an effec¬ 
tive unity of policy, and it will take such a form as to defeat the law 
officers in reaching it as a combination in restraint of trade. A mere 
nod, a mere suggestion, will accomplish what is desired. 

The question is, Shall we wait until the courts shall go through 
their slow processes in the existing cases and re-create and reorganize 
these corporations and others against which undecided suits are now 
pending, and also in the numerous suits that will be brought? Or 
shall we organize an administrative tribunal which, vested with the 
powers of investigation, publicity, and correction, will, by continu¬ 
ous supervision, prevent the growth of these abuses which the courts 
are now called upon sporadically and intermittently to correct by 
their slow processes? 

Certain fundamental considerations are thus raised, which l will 
present seriatim. 


22 


APPENDIX. 


(1) The first question is: Shall an interstate trade commission of 
some kind be organized? I imagine that there can hardly be any 
difference of opinion on the point that there should be an adminis¬ 
trative tribunal of high character, nonpartisan, or, rather, bipartisan, 
and independent of any department of the Government. I assume 
also that there should be a commission rather than one executive 
official, because there are powers of judgment and powers of discre¬ 
tion to be exercised. The organization should be quasi judicial in 
character. We want traditions; we want a fixed policy; we want 
trained experts; we want precedents; we want a body of administra¬ 
tive law built up. This can not be well done by the single occupant 
of an office, subject to constant changes in its incumbency and subject 
to higher executive authority. Such work must be done by a board 
or commission of dignity, permanence, and ability, independent of 
executive authority, except in its selection, and independent in char¬ 
acter. 

Of course, in performing any purely executive work one man is 
preferable to a commission. If only powers of investigation and 
publicity are given, a single-headed organization, like the Bureau of 
Corporations, might be the best for the work; but if judgment and 
discretion are to be exercised, or if we have in contemplation the 
exercise of any corrective power hereafter, or if the broad ends above 
outlined are to be attained, it seems to me that a commission is 
required. 

(2) The next question is, What shall be done with the Bureau of 
Corporations, with its 120 experts who are full of interest in their 
duties, who have had long training in just this sort of work, and who 
have shown their capacity to do good work? Shall that bureau be 
entirely done away with, or shall it be merged in this new organiza¬ 
tion? And then what shall become of the chief of that bureau and 
his deputy, both of whom have acquired a large experience and both 
of whom have the confidence of the country? The Bureau of Cor¬ 
porations would hardly be necessary, as a separate organization, if 
such a commission should be created. But shall we lose the momen¬ 
tum, the long experience, and trained personnel that this bureau has 
acquired ? 

To avoid this loss it is obviously desirable that we merge the 
Bureau of Corporations—as this bill does—with all its officials, funds, 
and powers, in this commission, and that we make, for the first two 
years, the Commissioner of Corporations one of the new commission¬ 
ers, and make him, for the first year, the chairman of the commis¬ 
sion, afterwards giving the power to the commission to select its own 
chairman. Thus the executive work as at present organized would 
go on without a break, and the difficulties usual to the period of early 
organization would be largely obviated. My idea, also, is to utilize 
the Deputy Commissioner of Corporations as the secretary of the 
commission. 

(3) The term of office of the commissioners is to be 10 years. The 
salary is to be $10,000. I should favor a much larger salary than 
that, but I do not know whether Congress would look with favor 
upon it. 

(4) The next question is, What shall be the test of the appli¬ 
cability of the act to corporations engaged in interstate trade? Shall 
it be size, as indicated, say, by its capital or its gross annual receipts, 


APPENDIX. 


23 


or shall it be the character of the business in which the corporations 
are engaged, namely, the production of certain great staple articles? 

I have inquired with great particularity of the Commissioner of 
Corporations and of the Solicitor General regarding this, and they 
say that they think the best test would be, for the present, the gross 
receipts of the corporations. If this test, provided in the bill, were 
applied, the jurisdiction of the commission would be probably con¬ 
fined to between 300 and 500 corporations. 

Both the Solicitor General and the Commissioner of Corporations 
have very carefully considered this question of a test based on the 
character of the production of the corporation, or of the commerce or 
commodity in which it deals, and they came to the conclusion that it 
would be very difficult to do that; that it would necessitate refine¬ 
ments and subrefinements with reference to the different articles. 

One suggestion was made which I think would improve the bill, 
that all corporations whose gross receipts exceed $1,000,000 should 
make certain reports to be called for by the commission, which re¬ 
ports can be classified by the commission for the purpose of statistical 
information, and that these reports shall be given with a view largely 
to determining what are the corporations that have $5,000,000 of 
gross receipts; but that only the corporations that have $5,000,000 
of gross receipts or above that shall be subject to the general pro¬ 
visions of the bill. 

(5) The next question is: What shall be the powers of the com¬ 
mission? Shall they be confined to investigation, requirement of 
statements, publicity, and recommendation to the President and to 
Congress, or shall they go further ? 

I would deem it very beneficial even if we could get a bill that 
would go no further than that, because we would then have five men 
of high ability and character who would immediately start upon 
this as their life work—not the kind of work that we do, broken up 
by thousands of other considerations and by other duties, but whose 
specialty it would be to ascertain the facts and the abuses requiring 
correction, and to give publicity regarding them and then to make 
their recommendation to Congress. 

((>) The next question is: Shall we provide the additional require¬ 
ment of registration, granting to the commission the accompanying 
power of denying or canceling registration for certain prescribed 
offenses, or for violation of the regulations of the commission? And 
shall the punishment of a recalcitrant corporation be confined simply 
to a cancellation of registration ? 

I had a provision in the bill which I originally drew, that for 
disobeying the law or the regulations made in pursuance thereof a 
recalcitrant corporation could be prevented from engaging in inter¬ 
state commerce. I am inclined to think that this is a rather extreme 
power and had better be left out for the present. 

We must also consider as to the preciseness with which the grounds 
for denial or cancellation should be stated in the law and whether 
the commission shall have the power to make regulations, lack of 
compliance with which will result either in a denial of registration 
or a cancellation. Registration being compulsory, the denial of regis¬ 
tration or the cancellation of registration would have simply a moral 
effect. The Solicitor General and the Commissioner of Corporations 
insist that that moral effect would be very great, though it involves 


24 


APPENDIX. 


no substantial right of property, but that all these corporations will 
be able to secure public confidence by securing the confidence of the 
commission itself. 

Senator Cummins. You do not propose any rules. The thing 
would have simply a moral effect if the board or commission did not 
have the power to determine how the corporation should be organized 
and how it should carry on its business. 

Senator New lands. That raises the next question. If you desire 
to provide for registration of corporations, how far will you wish 
to define the powers? 

As the power to regulate interstate commerce is a legislative power, 
the fundamental law requires that an act turning over the adminis¬ 
tration of such power to a commission or board shall prescribe the 
rules or standards under which the power is to be exercised. Would 
this apply to a mere registration in which no substantial property 
right is involved? For instance, would it be necessary for the law 
to define what are “ unfair or oppressive methods of competition,” 
what constitutes “ overcapitalization ” or “ improper financial or¬ 
ganization or could these matters be left to the judgment and dis¬ 
cretion of the commissioners without precise legal definition? 

Senator Cummins. What do you say about that? 

Senator Newlands. I am inclined to think that any general phrase 
intended to give them such powers as will prevent excessive capitali¬ 
zation or unfair or oppressive methods of competition would be 
upheld by the courts, particularly with reference to the denial or 
cancellation of the mere privilege of registration, which affects no 
substantial property right. 

Senator Cummins. Without taking up the question of the constitu¬ 
tional power of Congress to do the thing that is suggested here, you 
know that there is the widest difference among Members of the Sen¬ 
ate with regard to what constitutes proper capitalization. We de¬ 
bated that at some length in the railroad bill, and we could not agree 
even upon the subject as limited to the railways. 

Senator Newlands. For that very reason, it seems to me, the sug 
gestion of our chairman, Senator Clapp, is a very reasonable one s 
that we should confine our present exercise of legislation at this extra 
session to the appointment of an interstate trade commission and the 
merger in such commission of the Bureau of Corporations, such com¬ 
mission to have simply powers of publicity, inquest, and recom¬ 
mendation ; particularly in view of the fact that the Bureau of Cor¬ 
porations is not a bureau of complete publicity at present. On the 
contrary, it is instructed by the law to withhold from the public facts 
ascertained by public officers, unless the President gives his assent 
to publication. 

Senator Cummins. I agree with you regarding the weakness in tin 
organization of the Bureau of Corporations. But publicity is of no 
value unless the facts that are discovered can be compared with some 
rule of conduct which the law has laid down for the government of 
the corporations. It is bringing the force of public opinion to bear 
upon corporations'to induce them or compel them to obey the law, 
and if you have no law, publicity is of minor importance. ' The facts 
which must underlie all this legislation are perfectly well known— 
well known to every student of the subject or observer of the subject; 
that is, the facts that are necessary to declare the law or rule of 


APPENDIX. 


25 


conduct. A great many facts can be collected, as we have seen here 
all around, that are very curious and interesting, but they are not 
fundamental, they are not material, really, to the organization of the 
law. And it occurs to me—that is my view only—that your plan, 
while it leads in the right direction and we must have eventually, 
1 think, some such tribunal, it would seem to me before we organize 
a commission we should be able to determine what kind of law it 
shall administer. You know the facts just as well now as you will 
then. You want to know just how every company is capitalized, 
how it is organized, and just how its business is done or has been done. 
These things are merely interesting as history; they are not essential 
to the conclusion that you want to reach as to how corporations 
should be organized and how they should conduct themselves. 

Senator Newlands. I agree with you as to that, that it is unneces¬ 
sary in order to shape the law to have further investigation. We 
know to-day all the abuses that exist in corporate management. 
* * * But I will not pursue the question of immediate action 

further. I want to get through. I shall complete my statement in 
a very few minutes, and then I shall be very glad to take up this 
discussion with you, but I would like to gel my statement in the 
record in a compact form as the basis for further hearings at the 
next session. 

(T) In considering the powers which should be covered by this bill 
we shall have to take up the question as to whether the power to con¬ 
demn unreasonable and extortionate prices should be included, and, 
if so, what should be the form of the rule or standard fixed. Shall it 
be analogous to that applied to the railroad companies, namely, that 
prices shall be reasonable and the same to all? And shall the power 
be given, as originally in the railroad act. to condemn only an unfair 
or unreasonable price, or. as was later done with the railroad act, shall 
the power now also include that of fixing a reasonable price? Per¬ 
sonally. I am opposed to any attempt at present to fix prices. 

(8) Next, shall the provisions regarding registration be simply 
persuasive .or compulsory, and if compulsory as to the large corpo¬ 
rations, shall permissive registration be granted to the smaller corpo¬ 
rations? I incline to the view that it is better to make them compul¬ 
sory, at least for the large corporations, in order to insure the effec¬ 
tive operation of the system. 

(9) Shall the commission, in case of revocation of registration, have 
power to order that the offending corporation shall not engage in in¬ 
terstate commerce? My own view is that such power should not at 
present be granted. Therefore I would not urge the retention of sec¬ 
tion 11, which gives the commission power, in case of revocation of 
registration, to forbid the offending corporation to engage in inter¬ 
state coifnnerce. 

I do not think it advisable to overload the commission at this time, 
and yet we must bear in mind that our experience with the interstate- 
commerce act shows the great difficulty of adding needed amendments 
iater on. We all know what obstructions needed amendments of the 
interstate-commerce act met with, and it took nearly 20 years to get 
that act into really workable shape. 

The Commissioner of Corporations attaches great importance to 
registration, to the moral effect of refusing or canceling registration. 
He has since modified also his views somewhat as to the desirability 


26 


APPENDIX. 


of a commission, an idea which he at first opposed, and I think that 
he is now substantially in accord with this bill. The Solicitor Gen¬ 
eral has expressed himself very emphatically in favor of legislation 
on these lines. 

I shall append to my remarks quotations from a letter from Mr.. 
Herbert Knox Smith, in response to a series of questions which I put 
to him and after he had consulted with the Solicitor General. 

I have consulted the Secretary of Commerce and Labor. I have 
also consulted the Attorney General. Both the Secretary of Com¬ 
merce and Labor and the Attorney General were strong advocates 
of a national incorporation act, believing that national incorporation 
should cover interstate commerce, and that the act itself should con¬ 
tain all the necessary restrictions upon these corporations as to capi¬ 
talization, the area of their operations, etc. 

Senator Bran degee. I want to understand clearly whether in 
favoring a national incorporation act they meant to favor that and to 
pass what you propose. 

Senator Newlands. No. In my discussions with them I stated 
that, so far as I was individually concerned, I had tested the senti¬ 
ment of Congress regarding a national incorporation act, and par¬ 
ticularly the sentiment of my own party; that whilst I had advocated 
national incorporation with reference to great transportation com¬ 
panies whose functions are largely national, and with a view to tak¬ 
ing away from such States as New Jersey the jurisdiction which they 
had usurped over interstate commerce in the organization of corpora¬ 
tions national in scope, I was never able to make much headway 
with my own party, clinging, as it does, to the exercise of State 
functions and guarding against Federal encroachment. Therefore 
my argument was addressed to them, not in opposition to their view 
as to national incorporation, but as to the possibility of passing a 
national incorporation bill, and particularly in view of the present 
political status, the administration having drifted from one of pow¬ 
erful Republican control, a control entirely in sympathy with the 
broad exercise of national powers, to one of divided control. I think 
both of them, whilst they adhere to the view that a national incor¬ 
poration act would be the best method, acquiesce in the view that at 
present it is difficult, if not impossible, to secure the passage of such 
a bill. I have heard no expression from Secretary Nagel as to 
whether, that being the situation, he would be willing to favor a bill 
for an administrative commission such as this is, but the Attorney 
General has expressed himself regarding it, and he has indicated a 
disposition even to go further. I will append quotations to this 
effect from his recent speech at Duluth. 

Finally, I wish to point out one broad consideration. In the 
present status of our public policy as to the great corporate problem 
we have at least two leading and divergent schools of thought, two 
tendencies, each toward a different method of procedure. The one 
desires to maintain by governmental action if need be, the full com¬ 
petitive system and to rely chiefly on competition as the regulator of 
corporate business. The Sherman antitrust law strongly presents 
this principle. 

The other school inclines rather—to state the extremes—toward 
freely allowing combinations, both present and future, applying 


APPENDIX. 


27 


thereto governmental supervision and direction as the prime regu¬ 
lator. 

In my opinion it is too early to say which of these opposing tenden¬ 
cies should, or will, ultimately prevail. 

Holding such a view, I am urging this bill, because the system it 
embodies is exactly adapted to the undeveloped situation I have just 
described. It is available for either tendency; it can be made to 
serve either principle; it will help to show which is the correct one; 
and it does not commit us permanently to either of these two main 
lines of action. 

Its primary result will be to furnish both to Congress and to the 
public the accurate and broad information on corporate conditions 
that is necessary to determine the line of further advance. It neither 
legalizes nor forbids combination; it in no way affects the operation 
of the Sherman law; its work of publicity and supervision will tend 
strongly to promote fair competition and keep equally open to all the 
highways of commerce. 

On the other hand, it takes the situation as it is; it recognizes that 
there is a large degree of combination already existing, and it makes 
that condition a subject for supervision, study, and report to 
Congress. 

In short, it is a step upon which all can unite, as eminently fitted 
by its moderation and, indeed, by its own frankly tentative character 
to do what is imperatively needed for the present without preju¬ 
dicing the future. 

(The ({notations from the address of Attorney General 'Wicker- 
sham, delivered at Duluth, Minn., July 19, 1911, above referred to, 
are as follows:) 

The gradual interpretation of the act of July 2, 1890, resulting in the decisions 
and decrees rendered by the Supreme Court at its last term, has at last clearly 
demonstrated the effectiveness of that law to destroy existing combinations in 
restraint of interstate or international commerce and attempts to monopolize any 
part of it and to prevent renewed combination or monopolistic effort. * * * 

But the question remains, can the great end and object of the Sherman law— 
namely, that the normal course of trade and commerce among the States shall 
not be impeded by undue restraints and monopolies—be realized through the 
operation of that law alone? 

In dealing with transportation. Congress was not content to rely simply on 
the process of injunction to restrain and indictment to punish violations of the 
antitrust law. It also established an administrative commission clothed with 
powers—greatly enlarged from time to time—over those engaged in the trans¬ 
portation business. * * * 

Within what limits is legislation to regulate corporations engaged in 
interstate commerce other than transportation expedient and practicable? 
Should the analogy of the interstate commerce law and commission be 
followed? * * * 

That some further regulation over corporations carrying on commerce among 
the States may be necessary is a matter of current comment. * * * 

The Federal Department of Justice is not organized or equipped to maintain 
constant supervision and control over business organizations. It deals only with 
cases of violation of law. The activities of an administrative board or commis¬ 
sion would be directed to preventing such violations and in aiding business men 
to maintain a continued status of harmony with the requirements of law. 

Moreover, unless Congress shall provide for the establishment of corporations 
drawing their life and powers only from the National Government and subject 
only to its control, or shall confer specific powers on State corporations which 
will enable them to carry on commerce away from the State of their creation 
without the interference of States into which they go, the present unsatisfactory 
condition of carrying on business in the different States by means of many 
different corporations owned or controlled through stock ownership by a parent 


28 


APPENDIX. 


company created by some one State will continue, and in the natural, normal, 
healthy, and legitimate growth of such business questions of the application of 
the Sherman law must arise which can not be properly settled with the district 
.attorney or the Department of Justice, but which should be dealt with by an 
administrative body having appropriate jurisdiction. 

(The letter from the Commissioner of Corporations, Mr. Herbert 
Knox Smith, above referred to, follows:) 

Hon. Francis G. Newlands, 

United States Senate, Washington. 

Dear Senator: Your letter of the 2d instant was received, raising ceitain 
questions on the bill for an interstate trade commission (S. 2941) introduced 
by you. * * * 

Taking up your questions in order: 

(1) “ Shall an interstate trade commission be organized?” 

If the work is to be simply that of investigation and publicity, my experience 
would indicate that an organizaton under a single head would be decidedly 
more efficient. For purely executive or administrative action such form of 
organization is preferable. If, however, judicial or semijudicial powers are to 
be exercised the commission form has important advantages; it is better adapted 
for judicial decision, its judicial rulings would probably carry more weight, 
and, in any event, it tends to secure stabilty, continuity of policy, and greater 
independence of action. 

(2) “ Shall the Bureau of Corporations be merged in the commission?” 

If the interstate trade commission is to exercise substantially the powers 
now used by the Bureau of Corporations it seems almost necessary that the 
bureau should be merged in that commission, as the bureau would have little 
reason for further separate existence. There is also, however, the very im¬ 
portant consideration that the bureau is very necessary to the commission; the 
bureau is the one unit in the Government service which can immediately supply 
the experience, trained force, knowledge, and traditions which the commisson 
must have for its work. 

(3) “ Shall the test of the applicability of the acts to corporations engaged in 
interstate trade be the annual gross receipts, or the character of the business in 
which the corporations are engaged—namely, the production of great staple 
articles?” 

The question here is a debatable one, but experience with corporate business 
leads me to doubt the feasibility of a classification based on kinds of business or 
staple commodities. Such lines of demarcation are too vague. For example, 
certain companies deal wholly in the manufacture of lumber, others in its sale, 
others in the manufacture of goods primarily made out of other materials but 
having a certain proportion of lumber. Similarly with the steel industry and 
many others. It would be almost impossible to draw the line in many cases so 
as to say whether a corporation was engaged in a given industry or not. Many 
great wholesale houses sell a large amount of hardware. Would they be in¬ 
cluded. for example, as engaged in the steel industry? 

(4) “ Shall the power of the commission be confined to investigation and in¬ 
quest, requirement of statements and publicity, and recommendation to the 
President and to Congress?” 

“If not, shall the additional requirement of registration be made with the ac¬ 
companying power of denying or canceling registration for certain prescribed 
offenses or for violation of the regulations of the commission; and shall the 
punishment of a recalcitrant corporation be confined simply to a cancellation of 
registration?” 

Investigation, publicity, and recommendation should be in any event parts of 
the system. Personally, I favor strongly registration of corporation with power 
of cancellation. This gives a very practical means of control, which at the 
same time has the great advantage that it does not actually attempt the positive 
regulation of business. It allows credit for proper business conduct and im¬ 
poses discredit for the reverse, but assumes no power of direction and simply 
leaves the public to apply corrective pressure through public opinion and the 
investment of the public’s money. 

Answering also the last part of the question, it is probably better for the 
present to provide cancellation of registration as the only penalty for improper 
business conduct. I feel entirely satisfied that such United States registration 
would shortly become a valuable business and financial privilege for any large 


APPENDIX. 


29 


corporation. The standing of the company with that public opinion that under¬ 
lies legislative action and the financial status of its securities with the invest¬ 
ing public would be affected in a very practical way by the possession or can¬ 
cellation of such registry. The approval now granted to corporate transactions 
through existing State public-service commissions has already a very definite 
market effect on the price of securities and on the attitude of public opinion. 

(5) “The preciseness with which the grounds for denial or cancellation 
should be stated in the law, and whether the commission shall have the power 
to make regulations, lack of compliance with which will result either in a de¬ 
nial or cancellation?” 

The grounds of cancellation should be broadly stated, leaving the commis¬ 
sion to apply in specific cases the general rules prescribed by Congress. If 
power of making regulations be conferred on the commission, it should be 
simply for such regulations as will carry out the terms of the act and make 
effective the rules laid down therein. 

(0) “As the power to regulate interstate commerce is a legislative power, it 
has been held that the law turning over the administration of such power to a 
commission or board shall prescribe the rules or standards under which the 
power is to be exercised. Would this apply to a mere registration in which no 
substantial property right is involved?” 

The question of whether the delegation of a power is constitutional depends 
wholly on the nature of the power. Legislative power, strictly speaking, can 
not be delegated, but executive power can, of course, be conferred by legislation, 
and there can also be given quite broad power of executive administration in 
ascertaining facts and applying to them the rule established by legislation. It 
seems probable that the powers granted in this bill come under the latter head 
and are constitutional. 

An excellent case on the subject is Union Bridge Co. r. United States (201 
U. S., 304), where the earlier cases are reviewed in detail. The case itself 
involved the question of whether an act of Congress granting to the Secretary 
of War power to order the removal of the bridge over a navigable stream 
“ whenever the Secretary of War shall have reason to believe that any * * * 
bridge * * * over any of the navigable waters * * * is an unreason¬ 

able obstruction to the free navigation of such waters on account of insufficient 
height, width of span, or otherwise,” was a delegation of legislative power. 

The court held that this was not an objectionable delegation of power, and 
quoted, with approval from Lock’s appeal (72 Pa. St.. 491), as follows: 

“The legislature can not delegate its power to make a law, but it can make a 
law to delegate a power to determine some fact or state of things upon which 
the law makes, or intends to make, its own action depend.” 


See also other cases cited in this decision. 

An excellent legislative precedent is in the steamboat-inspection law, where, 
by section 4405, Revised Statutes, a board is given power to “establish all nec¬ 
essary regulations required to carry out in the most effective manner the pro¬ 
visions of this title.” These regulations now cover over 100 pages. 

In the same law, also, the inspectors are given broad power over the licenses 
of steamboat officers, as follows: “But such license shall be suspended or 
revoked upon satisfactory proof of bad conduct * * a power obviously 

closely analogous to the power of cancellation provided in your bill. 

It should be noted also that the only power delegated is the mere revocation 
of registration. Registration is not a property right. It is simply a privilege 
granted through the commission and revocable by it. 

Thus as stated in paragraph 5 above, rules of action and grounds for can¬ 
cellation of registration should be set forth in the bill itself, with sufficient 
definition to'make clear the intention of Congress as to the class of acts to be 
covered thereby. For example, the word “overcapitalization” is perhaps suffi¬ 
ciently definite in itself, while “unfair or oppressive methods of competition’ 

would perhaps be too indefinite. 

(7) “ In case the power to fix prices should be included, etc. 

I would prefer not to discuss the form of such power, as I personally believe 
it unwise to confer any such power on the commission, and do not consider 

myself competent to treat the subject properly. . . , 

‘ In considering any such treatment of our commercial problem as is attempted 
in this bill, it seems to me, at least, that the Government should not. at present, 
commit itself, by way of general policy, either to the theory of ** un united 
competition” or of “unlimited combination.” We are not, I feel sufficiently 
advanced to justify us in taking a definite position in favor of either one of 




30 


APPENDIX. 


these opposing ideas. Any system we adopt now should be so framed as to be 
alike available for either development. To give the power to fix prices would 
tend to commit us to a policy of industrial combination. 

(8) “ Shall the provision regarding registration be simply persuasive, or 
compulsory; and if compulsory as to the large corporations, shall permissive 
registration be granted to the smaller corporations?” 

I believe that the system would be entirely workable, if the publicity, etc., 
were simply permissive, and that some complications would thus be avoided. 
But a compulsory system for large corporations should also bring much the same 
results, especially if coupled with permissive registration for smaller concerns. 
The permissive feature for smaller companies seems decidedly desirable. 

(9) “ Shall the commission, in case of revocation of registration, have power 
to order that the offending corporation shall not engage in interstate commerce?” 

This power is a peculiarly drastic one, and would require rather elaborate 
machinery for its enforcement. I doubt both the wisdom and the necessity 
here. 

I take the liberty of adding some general considerations, which may be 
relevant to the discussion of such a system as is proposed by your bill. These 
views are based on an experience of eight years in the Bureau of Corporations. 

(10) The one imperative change now required in our policy toward the 
“ corporate problem,” is a change from our present system of treating that 
problem through occasional prosecution, to a system which will treat it with 
continuous administrative action. We should advance from a negative policy 
to a positive constructive policy; from mere occasional prohibition to permanent 
regulation and prevention. 

(11) One of the primary objects of the commission is the providing of proper- 
publicity. This should not be combined with the administration of the Sher¬ 
man law. It is probably true that efficient publicity is inconsistent with prose 
cution, at least as administered by the same office. The Bureau of Corporations, 
the present agent of corporate publicity, secures now at least nine-tenths of 
its information by voluntary cooperation. The interstate trade commission 
would continue this work, but should the function of prosecution under the 
Sherman law be combined with publicity, it is obvious that the present vol¬ 
untary cooperation of corporations, the main source of information, will very 
largely be destroyed. 

There are of course exceptions to this general principle. At times it would 
be necessary for the information obtained by the commission and indicating 
a clear and flagrant violation of law to be turned over to the Department of 
Justice. The Bureau of Corporations has in this manner given much assist¬ 
ance to the Department of Justice. The numerous prosecutions of the Stand¬ 
ard Oil Co. since 1906 for railway rate discriminations were all based on the 
report of that bureau, and the agents of the bureau furnished much of the 
evidence and assisted largely in the preparation of the cases. 

Similarly, in the recent prosecution of that company under the Sherman law, 
the case was instituted as a result of the investigations of the bureau, was 
largely prepared by its agents, and, I venture to say, would not have been 
successfully presented without their aid. Some of the ablest men in the bureau 
gave over a year of their time to this case. 

But in general such connection with prosecution should be wholly incidental 
and secondary, and the publicity work of the commission should be directed 
primarily at furnishing reliable economic and financial information for the 
general public and not at securing evidence for prosecution. 

(12) One of the most important features of such an administrative system 
of corporate regulation is its provision, as above referred to, for broad cor¬ 
porate publicity. The effects of such publicity have been well shown by the 
past work of the Bureau of Corporations, as set forth in the Annual Report 
of the Commissioner of Corporations for 1910. 

The report of the bureau on the transportation of petroleum, published in 
May, 1906, effected a sweeping decrease in the granting of railway rebates 
throughout the country. Practically every railroad involved in the railway 
discriminations described in this report canceled the objectionable rates within 
six months after the issuance of the report. 

The report of the bureau on cotton exchanges resulted within a few months 
in a marked improvement in the regulations of the New Orleans Cotton Ex¬ 
change, and while the New York Cotton Exchange has not yet made any 
changes in its system, that exchange, on March 23, 1911, voted “ that it is the 
:Sense of this meeting that since * * * the Department of Commerce and 


APPENDIX. 


31 


Labor has made an exhaustive investigation of the business methods of the 
cotton exchanges and has criticized the methods and by-laws of the New York 
Cotton Exchange * * * it will be good judgment on the part of this 

exchange to, * * * so far as possible, adopt the suggestions made by the 

Government.” 

In the tobacco industry the independent manufacturers have in many in¬ 
stances stated that the work of the bureau has caused the cessation of various 
objectionable methods of competition. 

In the problem of waterways, the reports of the bureau, three in number, 
have very widely influenced public opinion by showing the real questions to be 
solved and the real advantages to be attained in waterway transportation. 

A Federal administrative system of publicity and registration should develop 
both strength and elasticity. The administration of such a system should result 
in a definite and broadening policy, based on exact information, establishing 
definite standards of business action, of public economics, and of Government 
regulation, in themselves highly effective, and valuable also as the raw material 
for further statutory enactment. 

We may fairly hope to get from it a gradual rise in the standard of business 
conduct, closer relationship between large business and public authorities, 
marked improvement in corporate accounting and in the standing of our indus¬ 
trial securities, and the elimination of unfair practice and business privilege. 
All of this without any disturbance of properly conducted business. 

The time seeiqs ripe for such action. It has been obvious since the Supreme 
Court decisions on the Standard Oil and Tobacco Co. cases that the public is 
ready and anxious for an advance to some such administrative system of 
regulation by the Federal Government. It seems to be true that corporate 
managers concede more and more the necessity for such regulation and pub¬ 
licity, recognizing both its public necessity and its advantage to fair business. 

Very sincerely, yours, 


Herbert Knox Smith, Commissioner. 


Extracts from Report of the Senate Committee on Interstate 
Commerce on Senate Resolution No. 98, February 26, 1913. 


[S. Rept. 1326, G2d Cong., 3d sess.] 


from mr. cummins’s report. 


On the 26th day of July, 1911, the Senate adopted the foregoing 
resolution, and acting under the authority and in pursuance thereof 
the Committee on Interstate Commerce provided for open hearings 
upon the subject matter of the resolution. The hearings began on 
the 15th day of November, 1911, and were continued from day to 
day for more than three months, during which time 103 men appeared 
before the committee, and their statements, together with the ex¬ 
hibits and documents submitted by them, fill 2,799 printed pages. 
A printed copy of these statements, exhibits, and documents, includ¬ 
ing an index, laws and reference concerning industrial combinations 
in foreign countries, and a collection of judicial decisions touching the 
power of Congress in the regulation of commerce among the States, 
in all, five Volumes, is herewith presented to the Senate. 

While the committee is conscious that some of the matter adduced 
at the hearings and submitted as a part of this report is not relevant 
to the questions under consideration and of little worth, it believes 
that, upon the whole, the hearings have furnished one of the most 
valuable contributions that can be found in the literature of the 
subject. It is not yet ready to report any of the bills which are now 
before it, and which propose specific modifications of or additions 
to the existing statute; nor is it prepared at this time to report a 
substitute for them. It hopes that it may be able before the close of 



32 


APPENDIX. 


the present session to act finally upon these bills and recommend 
in definite form the legislation which it may think necessar}^ or wise 
to meet modern business conditions. It is, however, prepared to 
answer the general inquiries propounded in the resolution, and in 
view of the overwhelming importance of the subject it ventures to 
add to the direct response some observations upon the origin, pur¬ 
pose, and effect of the enactment commonly known as the antitrust 
law, to indicate wherein it is inadequate, and to suggest the general 
scope of further regulation. 

The committee is of the opinion: 

First. That the statute should stand as the fundamental law upon 
the subject, and that any supplemental legislation for more effectual 
control and regulation of interstate and foreign commerce should be 
in harmony with the purpose of the existing statute. 

Second. That whatever may be our views respecting the power of 
Congress to enact a general Federal incorporation law, it is neither 
necessary nor desirable at this time to provide for the organization 
under act of Congress of industrial corporations which propose to 
engage in commerce among the States and with foreign nations. 

Third. That it is desirable to impose upon corporations now or 
hereafter organized under State law, and engaged or proposing to 
engage in such commerce, further conditions or regulations affecting 
both their organization and the conduct of their business, and also 
to impose further conditions or regulations upon persons, copart¬ 
nerships, and other associations now engaged, or hereafter engaging, 
in such commerce, the general character of such regulation to be 
the same as those laid upon corporations, except such conditions or 
regulations as are in their very nature peculiar to the corporate form 
of commercial activity. 

******* 

There are three general fields in which the commission could work 
to the great advantage both of the people for whose protection the 
law exists and the people against whom it is directed. 

First. If the Bureau of Corporations were converted into an inde¬ 
pendent commission composed of trained, skillful men, and clothed 
with adequate authority, there could be gathered more complete and 
accurate knowledge of the organization, management, and practices of 
the corporations and associations engaged in national and interna¬ 
tional commerce than we now have. In saying this the committee 
does not mean to disparage the work of the Bureau of Corporations 
as hitherto carried on, but, valuable as the work has been, it is be¬ 
lieved that a greater service could be rendered by a commission with a 
distinct organization with adequate appropriations and added au¬ 
thority. Moreover, it is clear that the constant inquiry into and in¬ 
vestigation of interstate commerce in order to ascertain vdiether the 
law is being violated should be more closely connected with prosecu¬ 
tions for violations, when found to exist, than at the present time. 

Second. When the conditions upon the fulfillment of which per¬ 
sons and corporations may engage in commerce among the States md 
with foreign nations are imposed, as the committee has heretofore 
recommended, there will be some of them upon which the Govern¬ 
ment must act with administrative promptness rather than with 


APPENDIX. 


33 


judicial deliberation and delay. For instance, suppose Congress were 
to declare, as the committee thinks it ought to declare, that no corpo¬ 
ration should be permitted to engage in interstate or mternational 
commerce unless it be honestly capitalized, and that when anything 
but money is accepted for its stock that the value at which the prop¬ 
erty is so taken must be its fair, reasonable value. It seems dear that 
a corporation proposing to enter business should have in opportunity 
to come to some governmental tribunal and say, here is the' property 
purposed to be taken for stock, and here is the price at which it is to 
be taken, and thereupon ask for approval or disapproval of the prop¬ 
osition. It would be most unjust in such a case to allow the corpora¬ 
tion to go on for years and then be told that it must cease to do busi¬ 
ness because the value of the property was less than the par value 
of the stock issued for it. 

And, again, suppose that 10 out of 20 manufacturing establish¬ 
ments heretofore in competition with each other desire to consoli¬ 
date into one enterprise. There ought to be a way in which the men 
in such a venture could submit their plan to the Government and an 
inquiry made as to the legality of such a transaction, and if the 
Government was of the opinion that competitive conditions would 
not be substantially impaired there should be an approval, and in so 
far as the lawfulness of the exact thing proposed is concerned there 
should be a decision, and if favorable to the proposal there 
should be an end of that particular controversy for all time. Such 
results as these can be attained in no other way than through a com¬ 
mission which, though administrative in its character, would, in some 
instances, exercise quasi judicial functions. It is believed that 
through the intervention of such a body of men the legislative policy 
with respect to combinations and monopolies could be vastly more 
effectual than through the courts alone, which in most cases will take 
no cognizance of violations of the law for months or years after the 
violations occurred and when the difficulty of awarding reparation 
for the wrong is almost insurmountable. 

The committee has not attempted to be comprehensive as to the 
usefulness of the commission in this field, and has made these sug¬ 
gestions only to indicate in the most general way the assistance 
that could be rendered in the enforcement of the law. 

Third. One of the most serious problems in connection with suits 
brought under the antitrust act is to find the proper method of dis¬ 
integrating combinations that have been adjudged unlawful. The 
dissolution of a corporation or a series of associated corporations 
must often involve the consideration of plans for reorganization in 
order that the property which has been unlawfully employed may 
thereafter be lawfully used in commerce. The courts are not fitted 
for the work of reconstruction, and whatever jurisdiction they now 
have, or that may hereafter be conferred upon them with respect to 
such matters, it can not be gainsaid that a commission, the members 
of which are in close touch with business affairs, and who are inti¬ 
mately acquainted with the commercial situation, might be extremely 
helpful in the required readjustment. 

Respectfully submitted. 

S. Kept. 597. C>3-2-3 


34 


APPENDIX. 


ADDITIONAL VIEWS OF MR. POMERENE. 

With the report in general I am in accord. But there is one 
feature of it about which I desire to be more explicit, and that is the 
paragraph discussing the certainty of the provisions of the Sherman 
law as applicable to certain cases and its uncertainty as applicable to 
others. 

I approve the view that— 

There are many forms of combination and many practices in business which 
have been so unequivocally condemned by the Supreme Court that as to them 
and their like the statute is so clear that no person can be in any doubt respect¬ 
ing what is lawful and what is unlawful. 

There are other forms of organization and acts which seriously 
interfere with competition, such as interlocking directories, watering 
of stock, selling of merchandise in one locality at a less price than in 
another, and other practices which are so contrary to sound business 
principles and good morals that they can and should be specifically 
controlled or prohibited by statute. As to these, in the interest of 
certainty, there should be other and further legislation. But, what¬ 
ever may be the additional legislation, there will be many other con¬ 
tracts, combinations, and practices in “ undue and unreasonable 
restraint of trade,” which it is impossible for Congress to define by 
statute, because any attempt to so define them will, in practice, be 
found to exclude many other contracts, combinations, and practices 
which are equally inimical to the public good. As to these, we must 
always depend upon the sound wisdom and discretion of courts and 
juries for relief, just as in the past we have been obliged to trust to 
their judicial administration. 

To illustrate: We know that legislatures and courts have con¬ 
stantly refused to define fraud because the multiplicity of acts and 
circumstances involved in human affairs make it impossible of 
definition. 

The same may be said with equal truth as to what constitutes 
“ undue or unreasonable restraint of trade.” 

It is said with a great deal of force that men are not always able 
to tell in advance whether certain acts are in “ undue or unreasonable 
restraint of trade.” But however difficult this may be, it is no 
reason why they should be left for decision to the selfishness of 
interested parties uncontrolled by judicial decision under the prin¬ 
ciples of the common law or under the broad provisions of the 
Sherman law. 

In criminal cases it is often difficult to say in advance whether a 
given state of facts constitutes a reasonable doubt. But is that a- 
reason why courts and juries should not attempt to say in a specific 
case whether there was, in fact, a reasonable doubt or not ? 

In negligence cases it is equally difficult to say whether a given 
state of facts constitutes contributory negligence on the part of the 
plaintiff or reasonable cafe on the part of the defendant. But can 
this be urged as a reason for not leaving special cases to the judgment 
of the court and jury? 

In my judgment, what is “undue or unreasonable restraint of 
trade ” must, in many cases if not in most cases, be left largely for 
judicial determination and sound judgment and good morals will be 


APPENDIX. 


35 


a sufficient guide for those who are actuated by a proper public spirit 
rather than by selfish motives. 

While I believe there can be some additional legislation along the 
lines indicated, I am firmly of the opinion that the Sherman law is a 
clear and certain guide tor reasonable men who desire to comply 
with the law and do not exert themselves to evade its provisions. 

Atlee Pomerene. 

ADDITIONAL VIEWS OF MR. TILLMAN. 

The undersigned is not now prepared to say that a new national 
commission should be established for the better administration of the 
antitrust law. He is inclined to believe that we have too many com¬ 
missions now, composed largely of so-called u lame ducks,” both 
Democrats and Republicans, who have been defeated at the polls 
and are given these places mainly as a compensation and means of 
support. He thinks Congress ought to perform its own functions 
rather than surrender them to commissions thus created by Executive 
appointment. 

He does not assent to the particular language used on any point 
in the report of the committee, except where he has specifically so 
stated. 

As the committee is not now ready to propose specific measures of 
legislation, he prefers to wait and to listen to the recommendations 
of the incoming President of the United States. 

B. R. Tillman. 


ADDITIONAL VIEWS OF MR. GORE. 

I concur in the main body of the report and in the conclusions 
arrived at, except as to the specific recommendation looking to the 
establishment of a commission. Upon that recommendation I re¬ 
serve my judgment for the present. I could not yield my assent to 
this proposition without first considering both the principles and 
details of any measure proposing such a commission. My ultimate 
assent would depend upon the constitution and character of the com¬ 
mission and upon the extent and limitation of its powers and pur¬ 
poses. It may be possible that a commission could with propriety 
be vested with power to pass upon the form of a proposed organi¬ 
zation, but no commission should have authority to grant indulgences 
as to the methods, conduct, and operations of any such organization. 

T. P. Gore. 

Mr. Newlands confined himself entirely to the question of a 
trade commission bill, and included in his observations his original 
interstate trade commission bill as tentatively amended and approved 
by the Interstate Commerce Committee. His views are as follows: 

ADDITIONAL VIEWS OF MR. NEWLANDS. 

Whilst l agree with the general conclusion reached by Mr. Cum¬ 
mins in his report, I have not been able to study with sufficient care 
the decisions of the Supreme Court relating to the trusts to enable 


36 


appendix. 


me to form an independent opinion as to his analysis of them. For 
years I have contended that if at the time the Sherman Act was 
passed (the date of its passage being almost contemporaneous with 
that of the interstate-commerce act regarding the railroads) we had 
organized an interstate trade commission similar to the Interstate 
Commerce Commission, and with somewhat similar powers of in¬ 
vestigation and correction, we would have prevented or remedied 
many of the abuses which have since grown up, and that we would 
have gradually evolved a system of commercial law, through admin¬ 
istrative process, as complete as that which has been built up regard¬ 
ing our system of transportation. 

I presented my views relating to this matter at the first hearing 
of this committee regarding the control of corporations on the 4th 
day of August, 1911, and on the 16th of November, 1911 (hearings, 
pp. 1 to 26, inclusive). I then discussed a bill for the organization 
of an interstate trade commission (Senate bill No. 2941), which 
was introduced by me on the 5tli of July, 1911, and a substitute bill 
of the same number, introduced by me August 21, 1911. 

As a result of the additional light shed upon this subject by the 
hearings, I introduced in the Senate, on February 26, 1912, a bill 
(Senate bill 5485, 62d Cong., 2d sess.) entitled “A bill to create an 
Interstate Trade Commission,” etc. 

Later on, as a result of subsequent consideration, this bill has been 
amended, and I present it with the alterations as a tentative proposal 
for criticism and suggestion. The bill as amended is annexed hereto. 

Whilst I believe that the Sherman Antitrust Act should not be 
altered, I believe that it should be supplemented by such legislation 
as is shown to be necessary by the experience of the time. Such 
variety of views exists as to what this supplementary legislation shall 
be that 1 do not believe early legislation on this line is practicable. 
But I do believe that all can agree upon an Interstate Trade Commis¬ 
sion with powers of investigation and correction, and with the power 
to aid the courts in the administration of the Sherman Act and other 
supplementary legislation; and I believe that such a commission 
should be organized immediately, so that Congress can soon have 
the benefit of the recommendations which it will make as the result 
of its experience. 

I shall not enter into any labored argument upon this question. I 
shall simply content myself with quoting from previous utterances 
in the Senate. 

In the Senate, January 11, 1911: 

Mr. Newlands. * * * The railroad commission bill furnishes a model for 

the action of Congress upon matters involving minute and scientific investiga¬ 
tion. Had we followed the same method regarding trusts that we followed 
regarding railroads, we would have made much better progress in trust regu¬ 
lation. The antitrust act was passed 21 years ago. about the same time that 
the railroad commission was organized. The railroad question is practically 
settled: the settlement of the trust question has hardly been commenced. Had 
we submitted the administration of the antitrust act to an impartial quasi 
judicial tribunal similar to the Interstate Commerce Commission instead of to 
the Attorney General’s office, with its shifting officials, its varying policies, its 
lack of tiadition, record, and precedent, we would by this time have made 
gratifying progress in the regulation and control of trusts, through the quasi 
judicial investigations of a competent commission and through legislation based 
upon its recommendations. As it is, with the evasive and shifting incumbency 
and administration of the Attorney General’s office, oftentimes purely political 


APPENDIX. 


37 


in ihaisuder, we find that the trusts are more powerful to-day than when the 
antitrust act was passed, and that evils have grown up so interwoven with the 
general business of the country as to make men tremble at the consequence of 
their disruption. 

In the Senate, May 16, 1911: 

Mr. Xewi.ands. Mr. President, whilst I was addressing the Senate yesterday 
upon the importance of taking up immediately certain questions upon which 
public opinion has been formed, and crystallizing them into legislation, I re¬ 
ferred. among others, to the great questions of the combinations of capital 
called trusts which have assumed of late years so powerful and menacing an 
a spect. * * * 

The Supreme Court yesterday acted upon this matter with reference to one 
of the great trusts in a decision which applies to them all, and, as the result 
probably of the inertia and the inaction of Congress, has taken upon itself what 
the dissenting member of that court, Mr. Justice Harlan, declared to be judicial 
legislation, and has written into the statute words which Congress never put 
there; and so to-day we have a decision upholding the antitrust act so far as it 
applies to unreasonable restraint of trade. 

The question, therefore, presents itself to us whether we are to permit in 
the future the administration regarding these great combinations to drift prac¬ 
tically into the hands of the courts and subject the question as to the reason¬ 
ableness or unreasonableness of any restraint upon trade imposed by these 
corporations now existing and to be brought into existence in the future to the 
varying judgments of different courts upon the facts and the law, or whether 
we will organize, as the servant of Congress, an administrative tribunal similar 
to the Interst te Commerce Commission w in powers of recommendation, with 
powers of condemnation, with powers of correction similar to those enjoyed by 
the Interstate Commerce Commission over interstate transportation. 

* **#$** 

* * * What has been our experience regarding that branch of interstate 

commerce which covers transportation? Our experience has been that 20 years 
ago, just about the time the antitrust act was passed, Congress passed the inter¬ 
state-commerce act, creating a commission as its servant to attend to its duties 
under rules prescribed by Congress. The regulation of interstate commerce 
belonged to Congress. Congress wisely saw that it could not undertake that 
regulation in all its details; that it could not pass rate bills which would be 
satisfactory to every section of the country; that it could not reduce rates that 
were claimed to be excessive and increase rates that were claimed to be too low * 
that it could not correct the varying abuses which creep into the administration 
of every great enterprise. Therefore it created this commission as its servant, 
to carry out its will under rules established by it. 

The history of the last 23 years proves the wisdom of our action. By a 
gradual process of evolution this commission, as the result of gradual improve¬ 
ments in legislation and as the result of constantly increasing powers recom¬ 
mended by it and affirmed by Congress, has become a tribunal second in impor¬ 
tance only to the Supreme Court of the land. It has made transportation a 
science. It has studied all the intricate questions relating to it, and in a recent 
illuminating decision has formulated a great state paper that has impressed the 
country and the world with its wisdom. 

Now, contrast that action with other action taken by Congress regarding 
the trusts. It would have been possible 23 years ago, when the interstate 
commerce act was passed, with reference to interstate trade, to have established 
an industrial or trade commission or board similar to the Interstate Commerce 
Commission with reference to transportation. If we had done so and had put 
upon that commission the same class of men who have been appointed upon 
the Interstate Commerce Commission, we would have had the constant cor¬ 
rective power of that commission applied both to the existing trade corporations 
and to the trade corporation afterwards created. Many abuses would lia\e 
been prevented. Many abuses would have been corrected. As a result of the 
constant study and inquiry of a competent board engaged in this work as a 
specialization recommendations would have been made to Congress which would 
have been accepted, as were those recommendations made with reference to 
interstate transportation, and a great body of administrative law would have 
been built up and combinations of capital would have been effected without the 
abuses which have existed during the past 23 years. * * * 



38 


APPENDIX. 


In the Senate, June 22, 1911: 

Mr. Newlands. What is the second one which I suggested? I suggested legis¬ 
lation providing, in connection with the Bureau of Corporations, for a board of 
interstate trade, with powers of examination, correction, and recommendation 
with regard to interstate trade similar to those conferred upon the Interstate 
Commerce Commission regarding interstate transportation. This resolution 
was offered before the recent decision of the Supreme Court regarding the 
trusts, and I then declared that, whatever might be the decision of that court, 
the creation of such a commission was essential. Interstate trade is just as 
much a part of interstate commerce as interstate transportation. The abuses 
of interstate trade have become just as great as the abuses of interstate trans¬ 
portation in the past have been. Obviously the teachings of experience lead us 
to the organization of a commission or board similar to the Interstate Com¬ 
merce Commission, with a view of taking hold of the great combinations of 
capital and making them obedient to the law, giving such a commission powers 
of examination, recommendation, and condemnation similar to those enjoyed by 
the Interstate Commerce Commission. 

Since that decision the trust managers themselves have seen a great light, and 
in public examinations have stated that in their judgment the time has come 
for as complete regulation of corporations engaged in interstate trade as of 
corporations engaged in interstate transportation. Whether that regulation 
will ever extend so far as the regulation of the price itself is a matter to be 
determined in the future, for Congress will be called upon to decide how great 
these corporations shall be, what the extent of their capital shall be. what 
number of plants they shall own, and what shall be the extent of their opera¬ 
tions. If they conclude to maintain the principle of competition, even though it 
leads to destruction, there will then, of course, be no necessity <L regulating 
prices. But if they recognize the principle of helpful cooperation instead of 
destructive competition, then it will be necessary for them in extreme cases to 
face the question of the regulation of prices just as the prices of any public 
utility are regulated. 

I do not venture to express an opinion now as to what course should be pur¬ 
sued with reference to this great question, but it is time that the Interstate 
Commerce Committee of the Senate were entering upon an inquiry of the most 
important question in economics that has engaged the attention of the country 
since the railroad question was first presented to it. 

Quotation from Mr. Newlands's statement before the committee on 
the 15th day of November, 1911 (hearings, p. 25) : 

Senator Newlands. Mr. Chairman, during the late extra session 
I introduced Senate bill 2941, for the creation of an interstate trade 
commission with powers over corporations engaged in interstate 
trade similar in many respects to those possessed by the Interstate 
Commerce Commission over interstate transportation. On the 4th 
of August, toward the close of the extra session, this committee, of 
which I am a member, gave me a hearing on the bill and I made a 
preliminary statement, explaining its terms and the conditions it 
was intended to meet. That statement, together with quotations 
from the President, the Attorney General, and the Commissioner of 
Corporations, has been printed as the first part of the hearings under 
the resolution introduced by the chairman. 

The bill provides that all interstate corporations (except rail¬ 
roads) whose gross annual receipts exceed $5,000,000 shall make 
regular reports to the commission as to their business transactions, 
shall be subject at will to the examination of the commission, and 
shall, upon complying with such requirements, have the exclusive 
right to use the title “United States registered.” The bill also pro¬ 
vides that for violation of the Sherman law, improper capitaliza¬ 
tion, unfair methods of competition, acceptance of railway rebates, 
or other improper business transactions the commission may at will 
cancel such registration. It is recognized that the right of a cor- 


APPENDIX. 


39 


poration to publish the fact of such registration will shortly become 
a valuable financial privilege, and that the fear of cancellation of 
such light will be a strong restraining influence against improper 
transactions. 

The bill provides a permanent administrative body of trained 
experts, who shall have as their sole specialty the supervision and 
registration of large corporations and supply accurate information 
thereon to the public, and shall make recommendations to Congress 
for any further legislation that may seem necessary. 

I may later on have something further to say before this com¬ 
mittee regarding this bill; but I wish to state at present that since 
the bill was introduced there has been a wide discussion throughout 
the country upon two divergent lines of thought, one insisting on 
absolutely free and unrestricted competition as the regulator of cor¬ 
porate business, and the other inclining toward allowing large com¬ 
binations of capital and applying thereto Government supervision 
and direction as the prime regulator. It is difficult to say now 
which of these opposing tendencies should or will ultimately prevail. 
The bill which I have introduced is, in my judgment, adapted to this 
undeveloped situation. It will help us to determine which of these 
theories is the correct one: it will furnish to Congress and to the 
public the accurate and bread information on corporate conditions 
that is necessary to determine the line of further advance. It does 
not affect the operation or the enforcement of the Sherman law; 
its work of publicity and supervision will tend to promote fair com¬ 
petition and keep equally open to all the highways of commerce. 
On the other hand, it takes the situation as it is. recognizes that 
there is a large degree of combination already existing, and makes 
that condition a subject for supervision, study, and report to Con¬ 
gress. Its frankly tentative character and its moderation recom¬ 
mend it as a step upon which all can unite in doing what is impera¬ 
tively needed for the present without prejudicing the future. 

I trust that the committee will see the wisdom, without waiting 
for the end of this investigation, of recommending this tentative 
measure, which will be an aid in the final solution of all the pressing 
questions relating to trade corporations. 

The following is the Interstate Trade Commission bill introduced 
bv Mr. Newlands as tentatively amended by the Senate Committee 
on Interstate Commerce. 

The committee took no final action upon it: 

fS. 5485, Sixty-second Congress, second session.] 

A BILL To create an Interstate Trade Commission, to define its power%and duties, and 

for other purposes. 

Be it enacted bp the Senate and House of Representatives of the United States 
of America in (Urnpress assembled , That this act shall be referred to and cited as 
the interstate Trade Commission act. Corporations a majority of whose vot¬ 
ing securities is held or owned by any corporation subject to the terms of this 
act are referred to herein as subsidiaries of such holding or owning corporation. 

Skc. 2. That there is hereby created a body to be known as the Interstate 
Trade Commission, which shall consist of three members of whom no more 
than two shall belong to the same political party. The commission shall be 
appointed by the President, by and with the advice and consent of the Senate, 
and the terms of such commissioners so first appointed shall be three, six, and 
nine years, respectively, and shall be so designated by the President in making 


40 


APPENDIX. 


such appointments; and thereafter all the commissioners shall hold office for 
the term of nine years, and shall be appointed by the President, by and with 
the advice and consent of the Senate. Vacancies shall be filled by like appoint¬ 
ment and confirmation for the unexpired term. Each member of said commis¬ 
sion shall receive a salary of $10,000 a year. The office of the commission 
shall be at Washington, in the District of Columbia, but the commission may 
hold meetings elsewhere when necessary and convenient. 

Sec. 3. That the Bureau of Corporations is hereby transferred to and merged 
in said commission, and all of the powers, duties, records, papers, and funds be¬ 
longing or pertaining to the Bureau of Corporations shall hereafter belong and 
pertain to the Interstate Trade Commission, and all the officers and employees 
of said bureau shall thereupon be officers and employees of the Interstate Trade 
Commission. The said commission shall also have a secretary, a chief clerk, 
and such clerks, inspectors, examiners, experts, messengers, and other assistants 
as from time to time may be necessary and as may be appropriated for by 
Congress. 

Sec. 4. That all corporations engaged in commerce among the several States 
or with foreign nations, excepting common carriers, shall from time to time 
furnish to the commission such information, statement, and records of their 
organization, business, financial condition, conduct, and management and the 
organization, business, financial condition, conduct, and management of their 
subsidiaries at such time, to such degree and extent, and in such form as may 
be prescribed by the commission; and the commission at all reasonable times, 
or its duly authorized agent or agents, shall have complete access to all records, 
accounts, minutes, books, and papers of such corporations and their subsidiaries, 
including the records of any of their executive or other committees. Failure 
or neglect on the part of any corporation subject to this act, or of any of its 
subsidiaries, to comply with the terms of this section within such time after 
written demand shall have been made upon such corporation by the commission 
requiring such compliance, as shall be fixed by the commission, shall constitute 
a misdemeanor, and upon conviction such corporation shall be subject to a fine 
of not more than $1,000 for every day of such failure or neglect. 

Sec. 5. The information so obtained shall be public records, and the commis¬ 
sion shall from time to time make public such information in such form and to 
such extent as it may deem necessary. 

Sec. 6. That the district courts of the United States, upon the application of 
the commission alleging a failure to comply with any order of the commission 
or alleging a failure to comply with or a violation of any of the provisions of 
this act by any corporation subject thereto, shall have jurisdiction to issue a 
writ or writs of mandamus or injunction or other order enforcing such order 
of the commission or commanding such corporation, its officers and employees, 
to comply with the provisions of this act. 

Sec. 7. That for the purposes of this act the commission shall have the power 
to require by subpoena the attendance and testimony of witnesses and the pro¬ 
duction of all books, papers, contracts, agreements, documents, or other things 
of every kind and nature whatsoever relating to any matter under investiga¬ 
tion by the commission. Such attendance of witnesses and the production of 
such documentary evidence may be required from any place in the United 
States at any designated place of hearing, and in case of disobedience to a 
subpoena the commission, or any party to a proceeding before the commission, 
may invoke the aid of any court of the United States in requiring the attend¬ 
ance and testimony of witnesses and the production of books, papers, and 
documents under the provisions of this section. 

And any of the circuit courts of the United States within the jurisdiction of 
which such inquiry is carried on may, in case of contumacy or refusal to obey 
a subpoena issued to any corporation subject to the provisions of this act, cr 
other person, issue an order requiring such corporation, or other person to 
appear before said commission (and produce books, documents and papers, if 
so ordered) and give evidence touching the matter in question, and any. failure 
to obey such order of the court may be punished by such court as a contempt 
thereof. This claim that any such testimony or evidence may tend to criminate 
the person giving such evidence shall not excuse such witness from testifying. 

The testimony of any witness may be taken at the instance of a party in any 
proceeding or investigation pending before the commission by deposition at 
any time after the inquiry is instituted. The commission may also order testi¬ 
mony to be taken by deposition in any proceeding or investigation pending 
before it at any stago of such proceeding or investigation. Such denosition 


APPENDIX. 


41 


may he taken before any person authorized so to do by the commission and who 
has |K>wer to administer oaths. 

Any person may be compelled to appear and depose, and to produce docu¬ 
mentary evidence, in the same manner as witnesses may be compelled to appear 
and testify and produce documentary evidence before the commission as here¬ 
inbefore provided. Such testimony shall be reduced to writing. 

Witnesses whose testimony is taken under the provisions of this act shall 
severally be entitled to the same fees as are paid for like services in the courts 
of the United States. 

No person shall be excused from attending and testifying, or from producing 
books, papers, documents, or other things before this commission or in obedience 
to the subpoena of the commission whether such subpoena be signed or issued by 
one or more of the commissioners on the ground or for the reason that the 
testimony or evidence, documentary or otherwise, required of him may tend 
to criminate him or subject him to a penalty or forfeiture. Rut no natural 
person shall be prosecuted or subjected to any penalty or forfeiture for or on 
account of any transaction, matter, or thing concerning which he may testify 
under oath or produce evidence, documentary or otherwise, before said com¬ 
mission in obedience to a subpoena issued by it in a proceeding instituted upon 
its own initiative: Provided, That no person so testifying shall be exempt from 
prosecution and punishment for perjury committed in so testifying. The pur¬ 
pose of this provision is to give immunity only to natural persons who under 
oath testify in response to a subpoena of the commission in an inquiry instituted 
by the commission. 

Sec. 8. That the said commission shall, on. or before the first day of January 
in each year, make a report, which shall be transmitted to Congress. This 
report shall contain such information and data collected by the commission as 
it may deem of value in the determination of questions connected with the 
regulation of commerce, together with such recommendations as to additional 
legislation relating thereto as the commission may deem necessary. 

Sec. 9. That any person willfully making or furnishing to said commission 
any statement, return, or record required by this act, when knowing such state¬ 
ment, return, or record to be false in any material particular, shall be guilty of 
a misdemeanor, and upon conviction shall be fined not more than $1,000 or 
imprisoned not more than one year, or both. 

Sec. 10. That in case a final decree shall be issued against any corporation 
under the act entitled “An act to protect trade and commerce against unlawful 
restraints and monopolies,” approved July second, eighteen hundred and ninety, 
or under sections seventy-three to seventy-seven, inclusive, of “An act to reduce 
taxation, to provide revenue for the Government, and for other purposes,” 
which became a law August twenty-seventh, eighteen hundred and ninety-four, 
the court entering such decree may, in its discretion, refer to the commission 
its decree, with instructions to take evidence, consider such facts, and repprt 
to the court the findings as to method of dissolution or reorganization as the 
commission shall consider best fitted to carry out such decree; if a reorganiza¬ 
tion takes place under a decree, the commission shall inform itself respecting 
the reorganization, and if it is of the opinion that it is not in harmony with 
the decree it shall, through counsel, inform the court for such action as the 
court may take. 

Sec. 11. That the said commission may at any time, upon complaint of any 
person or corporation, or upon its own initiative, or upon the request of the 
Attorney General, or of the corporation affected. Investigate any corporation 
subject to the provisions of this act for the purpose of determining whether such 
corporation has been guilty of a violation of the act entitled “An act to protect 
trade and commerce against unlawful restraints and monopolies.” approved 
July second, eighteen hundred and ninety, or under sections seventy-three to 
seventy-seven inclusive, of an “Act to reduce taxation,” and so forth, which 
became a law August twenty-seventh, eighteen hundred and ninety-four, or of 
any of the provisions of this act, and may hold such hearings and take such 
evidence as it may deem necessary; and in case the commission shall find that 
such corporation has been guilty of a violation of the provisions of said acts or 
of this act it shall make a finding, stating the facts, and prescribing the acts, 
transactions, and readjustments necessary in order that said corporation may 
thereafter comply with the terms of said acts and of this act, and shall transmit 
a copy of the said finding in full to such corporation. If within sixty days 
after transmitting said finding, or such extension thereof as shall be given by 
the commission, the corporation shall not have complied with the terms of the 


42 


APPENDIX. 


finding, and shall not have performed the acts prescribed as necessary to make 
it comply with the said acts or with this act, the commission shall report the 
fact of noncompliance to the Attorney General, together with a copy of such 
finding, for his action under the said acts or of this act. But the commission 
may, if it deems it proper, report the facts to the Attorney General without 
calling upon such corporation for compliance with said acts or with this act. 

Nothing contained in this act shall be construed to prevent or interfere with 
the Attorney General in enforcing the provisions of the act to protect commerce, 
and so forth, approved July second, eighteen hundred and ninety. 

Messrs. Crane, Brandegee, Oliver, and Lippitt expressed them¬ 
selves as follows: 


MINORITY VIEWS. 

The undersigned members of the Senate Committee on Interstate 
Commerce are unable to agree to the report of the majority of the 
committee on Senate resolution 98, as to “ what changes are neces¬ 
sary or desirable in the laws of the United States relating to the crea¬ 
tion and control of corporations engaged in interstate commerce and 
what changes are necessary or desirable in the laws of the United 
States relating to persons or firms engaged in interstate commerce.” 

While certain features of the report are commendable, there are 
several conclusions therein which do not accord with our views, and 
therefore we are prevented from approving the report as a whole. 

W. M. Crane. 

Frank B. Brandegee. 

George T. Oliver. 

Henry F. Lippitt. 


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